According to the annual report for 2017 and the quarterly report for 2018, the company achieved an operating income of 8.654 billion yuan and a net profit of 615 million yuan in 2017, an increase of 6.63% and 136.2% respectively over the same period last year. In the first quarter of 2018, the operating income was 1.523 billion yuan and the net profit was 266 million yuan, up 39% and 929.8% respectively.
Sales blossomed everywhere, and performance continued to release: the reasons for the sharp increase in the company's performance in 2017 are as follows: 1. Last year's low base, but this year's settlement volume and price rose. Gross profit margin increased by about 7 percentage points compared with 2016 to 36.28%. During the reporting period, the investment income calculated by the associated company equity method increased by 2689.72% due to the sale of part of the equity of the associated company. With the completion and delivery of Chengdu Jincheng Lakeside Phase I project and Qingdao Peninsula City-state Phase I villa project in the second quarter, as well as the completion and occupation of the C2 project of Huizhou Tianyu Garden in the first quarter, the company's net profit in the first half of the year is expected to increase by 220% 270%. In 2017, the company achieved sales of 14.491 billion yuan, an increase of 37% over the same period last year. Sales are mainly contributed by Chengdu, Huizhou, Shanghai and Qingdao. The company set a sales target of 16.7 billion yuan in 2018, an increase of 15% over the actual sales in 2017.
Increased replenishment efforts, increased financial pressure: in 2017, the company significantly increased land acquisition efforts, the first to enter Chongqing and Foshan, an additional capacity area of 163.84 million square meters, an increase of 218% over the same period last year.
In addition to the open market auction, the company fully enjoys the resource advantages of the group's major shareholders and acquires some high-quality assets through acquisition and entrusted management, such as the Shenzhen Shangsha project and the Baocheng 26 area II project. We believe that the group's major shareholders are rich in old reform resources in Shenzhen, and the company's resource potential in this area is worth looking forward to. As the company increased investment in projects in 2017, the net debt ratio and short-term debt pressure also increased significantly. With the registration of the company's 2.2 billion successful vote issue, it will not only bring financial guarantee for expansion in the future, but also help to optimize the company's debt structure.
Explore the "real estate + finance" model, equity incentives go hand in hand with the project investment: the company continues to explore the "real estate + finance" business model, and participates in initiating the establishment of real estate funds in Baoyingke and Tibet Songxuan, and has made substantial progress in project acquisition. In terms of incentive mechanism, the company announced the draft equity incentive plan in March 2018, and the number of incentive shares accounted for about 3.01% of the company's total equity. In addition, seven projects have been implemented. With the gradual improvement of the incentive mechanism of the company, it will help to achieve the binding of the interests of management and employees to the company, and promote the performance of the company.
Profit forecast and investment rating: we expect the company's EPS in 2018 and 2019 to be 1.52 yuan and 2.18 yuan respectively, maintaining a "buy" rating.
Risk hint: the real estate regulation and control policy continues and the settlement speed is not as fast as expected.