Main points of investment
Our point of view: Shenzhen Holdings' sales in the first half of the year have retrogressed due to Shenzhen's strict restriction policy, and its annual sales target has also been affected, but the company's project in Shenzhen is a scarce high-quality resource. no sales this year will have no impact on annual results. In addition, the company's land reserve is further optimized, more focused on first-tier cities, and will increase land acquisition efforts in Shenzhen in the future. We expect the company's operating income to be HK $123.1 and HK $27.5 billion respectively in 2017 / 2018, a decrease of 42.4% and an increase of 123.4% over the same period last year, and the core net profit belonging to shareholders of listed companies is HK $36.2 and HK $4.13 billion, up 38.4% and 14.2% respectively over the same period last year. We maintain the company's "buy" rating, with a target price of HK $4.96, which is 37% higher than the current price. This is equivalent to 7.7 times PE of 8.8 NAV in 2017 / 2018, and a 40% discount. Investors are advised to pay attention to it.
The interim results were in line with expectations: the company's mid-2017 operating income was HK $5.454 billion, down 14.6% from the same period last year; gross profit was HK $2.197 billion, basically the same as last year, and the gross profit margin reached 40.3%, an increase of 6.5 percentage points over the same period last year. This is mainly due to the high gross profit margin of the Shenzhen project carried forward and the increase in gross profit margin of second-and third-tier urban projects. The net profit belonging to shareholders of listed companies was HK $3.629 billion, up 119.1% from the same period last year, mainly due to an one-time gain of HK $3.33 billion from the sale of third-and fourth-tier urban projects. The core net profit reached HK $3.452 billion, up 32% from the core net profit for the whole of 2016, and the company's medium-term results were in line with expectations. The company intends to pay an interim dividend of HK7 cents per share.
Under the influence of Shenzhen's strict restriction policy, contract sales retrogressed: the company's contract sales amount and area in the first half of the year were 9.1 billion yuan and 400000 square meters respectively, down 35.3% and 32.5% respectively from the same period last year, mainly due to the influence of Shenzhen's strict restriction policy. Star project Shenye Zhongcheng project will delay sales. In the first half of the year, 76% of contract sales still came from Shenzhen, mainly contributed by Shenye Shangcheng office building and Tanglang city. At present, the total area of the company's salable projects is 1 million square meters, including Shenye Zhongcheng (90, 000 square meters) and Shenye Dongling (51000 square meters).
Risk tips: macroeconomic growth slows, industry restrictions are tightened, and company sales fall short of expectations