Main points of investment
The performance was in line with expectations, and the proportion of settlement of projects outside Beijing increased. In 2017, the company achieved a turnover of 15.456 billion yuan, up 57.24% from the same period last year, and the net profit returned to its mother was 1.14 billion yuan, up 89.88% from the same period last year. The earnings per share is 0.34 yuan, the cash dividend per share is 0.11 yuan, and the dividend yield is 2.49% based on the current market value. The company's performance growth mainly comes from the increase in settlement scale. Beijing Contemporary Beichen MOMA, Suzhou Beichen Xuhui No. 1 Hospital and Changsha Beichen Delta are the company's main settlement projects. From a regional point of view, Changsha accounts for 44.18% of business income, while Suzhou accounts for 11.84%.
The company has sufficient land reserve and conservative sales target, which is expected to be achieved. In 2017, the company achieved a sales area of 1.24 million square meters, with a sales amount of 22.3 billion yuan, which was basically the same as that in 2016; in 2017, the sales recovery amount was 20.2 billion yuan, with a recovery rate of 91%. Total sales in the 13 cities where the company's projects are located fell 0.1% in 2017, and the sales area decreased by 10.8%. We believe that the future policy of the city where the company is located will remain basically stable and the market will be generally stable. In 2018, the company plans to achieve a sales area of 1.54 million square meters and sales of 24 billion yuan, which is not much different from that in 2017. At the end of 2017, the company's development business has a total land reserve of 9.35 million square meters and a rights and interests area of 7.89 million square meters. We estimate that the total land acquisition scale of the company in the past four years (full caliber) is more than 4.6 million square meters, involving a land price of about 35 billion. The positive attitude of the company has laid a solid foundation for achieving the sales target.
Holding property resources are scarce. The company holds and operates properties with an area of more than 1.2 million square meters (including conference centers, office buildings, hotels, apartments, and commerce) in the core area of the Asian Olympic Games in Beijing. In 2017, the operating income of investment property reached 2.599 billion yuan, up 6.32% from the same period last year. The profit before tax was 848 million yuan, up 8.21% from the same period last year, and the operating performance was improved. The company's relatively scarce property holdings enhance the certainty of the company's value.
The company's cost of capital remains low and its leverage ratio has increased. At the end of 2017, the company's interest-bearing debt was 31.897 billion yuan, up more than 20% from the end of 2016; the average financing cost of the company was 5.94%, down 35 basis points from the end of 2016. It is expected that as the financing environment changes, the company's cost of capital will increase. By the end of 2017, the company's net debt ratio exceeded 160%, an increase from the past few years, which may indicate a slowdown in the pace of land acquisition in the future.
Risk hint. The regional regulation and control of the company is relatively strict, and it is difficult to obtain a sales license. The company's sales and performance growth is limited in the next few years, so the risk of slow profit growth. The risk of a company's rising cost of capital.
Profit forecast and valuation. We have noticed that the company has got rid of the disadvantage of relying entirely on one or two projects in history, and the national layout is beginning to succeed. And the value of the company's project resources in Beijing is determined. According to the company's new sales and settlement pace, we slightly adjust the company's profit forecast. It is estimated that in 2018-19-20, the EPS will be 0.38 yuan 0.42 yuan per share (the original forecast is 0.40 yuan per share in 19 years). We maintain the company's target price of 4.80 yuan per share and maintain the "overweight" investment rating.