Main points of investment:
Event: the company announces the quarterly report of 17 years and the announcement of profit increase for the whole year.
As a result of the decrease in carry-over projects, the company's revenue declined compared with the same period last year. The operating income of 17Q1-3 was 7.058 billion yuan, down 16.44% from the same period last year. Operating income is mainly affected by the short-term carry-over cycle and the reduction of project / area in the current period. The operating cost was 5.219 billion yuan, down 17.49% from the same period last year. As operating costs fell less than revenue, the company's gross profit margin was 26.05%, up 0.95 percentage points from the same period last year.
The sale of shares in subsidiaries in the first three quarters kept profits at a year-on-year growth rate of 20% and maintained high growth for the whole year. Although the income and cost affected by the carry-over project decreased in the first three quarters of 17 years, the company gained 369 million yuan in income from the disposal of part of its subsidiaries in the current period, making the company's net profit reach 1.563 billion yuan, or 0.86 per share, an increase of 22.15% over the same period last year. In addition, the company announced the 17-year annual profit advance announcement, the company is expected to return to the mother of net profit of about 9-1.1 billion yuan, an increase of 55-100% year-on-year, earnings per share of about 0.95-1.22 yuan per share. Affected by the settlement cycle, the company's revenue declined in the first three quarters compared with the same period last year, but we believe that Q4 will release its performance and show rapid profit growth for the whole year.
The increase in short-term borrowing and the decrease in monetary cash are due to the increase in project investment. The company's 17-year Q1-3 short-term loans increased to 958 million yuan, a year-on-year increase of 1.09 times. Monetary cash was 7.74 billion yuan, down 23% from the same period last year. We believe that the increase in short-term loans and the decrease in monetary cash are mainly due to the company's need to pay for newly acquired land projects. The company's asset-liability ratio and interest-bearing debt ratio increased slightly in the current period, with an asset-liability ratio of 76.45% (year-on-year + 4.72%) and an interest-bearing debt ratio of 46.61% (year-on-year + 5.58%). At the same time, the company received 7.08 billion yuan in advance, an increase of 298 million yuan over the same period last year, indicating that the company's real estate sales in the current period are better than those in the same period of 16 years.
The new phase of equity incentive urges the company's performance growth. The company announced the latest revision of the equity incentive scheme on September 21: 27.7 million shares (2.93% of the total share capital) were awarded to 58 management personnel and core backbone of the company. The plan was approved by the general meeting of shareholders on October 17th. According to the plan, the requirement for lifting the restriction is that the signed sales amount of real estate in 17,18 and 19 years is not less than 110,150 and 20 billion yuan respectively. Based on the net profit attributed to the parent company in 2016, the growth rate of net profit was 130% in 18 years and 230% in 19 years. The new phase of equity incentive is conducive to encourage the core backbone, bind the interests of the company and employees, and urge the core backbone to improve the performance of the company.
Maintain a "buy" rating. We expect the company's EPS for 17 and 18 years to be 1.15 yuan and 1.37 yuan per share. On October 26th, the closing price of the company was 12.59 yuan, corresponding to about 11 times the 17-year PE. Taking into account the company's 17-year large land reserve in Chengdu, newly approved equity incentives and 17-year performance advance announcement, we give the company a 17-year 18-fold valuation, corresponding to a target price of 20.65 yuan, maintaining a "buy" rating. Risk hint: policy regulation continues, and both sales and prices in regulated cities decline.