The net profit of 1H18 was 59.57 million yuan, down 80.2% from the same period last year, lower than expected.
Huayuan Real Estate announced 1H18 results: operating income was 1.34 billion yuan, down 65.0% from the same period last year; net profit from home was 59.57 million yuan, down 80.2% from the same period last year, corresponding to earnings per share of 0.03 yuan.
The sharp decline in revenue and profit is mainly due to the low proportion of project settlement in the first half of the year. The company's operating income fell 65.0% year-on-year to 1.34 billion yuan, mainly because the proportion of projects that met the settlement conditions during the period was too low. It is expected that operating income will rebound significantly in the second half of the year as more projects participate in settlement, and positive growth is still expected for the whole year.
We will actively thicken soil storage resources, and the area of construction has increased substantially. During the period, the company added 1.725 million square meters of land storage, with a corresponding value of 19.3 billion yuan (estimated at the average sales price in the first half of the year); the area of new construction increased by 943.2% to 1.45 million square meters over the same period last year, and the area of work started and resumed increased by 79.4% to 2.383 million square meters over the same period last year, and the pace of turnover accelerated.
The net debt ratio has increased significantly, and it is proposed to issue 5 billion yuan of private bonds to ease the repayment pressure. At the end of the period, the company's net debt ratio reached 194.5%, a sharp increase of 77.7% compared with the beginning of the period, mainly due to the company's active expansion of land during the period, the monetary capital decreased by 67% to 2.42 billion yuan compared with the beginning of the year. In order to ease the pressure on short-term debt repayment, the company announced in April that it planned to issue private equity bonds of no more than 5 billion yuan and planned to further replenish cash on hand through financing channels such as US dollar bonds.
Trend of development
Sales for the whole year are expected to reach 12 billion, an increase of more than 50% over the same period last year. The company achieved contracted sales of 4.26 billion yuan in the first half of the year, down 0.7% from the same period last year. In the second half of the year, with a sharp increase in push goods, annual sales are expected to reach 12 billion yuan, corresponding to a year-on-year growth rate of 55%.
Profit forecast
Considering that the full-year settlement progress may be lower than expected, we lowered our earnings per share forecast for 18max 19e by 9.8% Universe 9.5% to RMB 0.36exp 0.42.
Valuation and suggestion
The company's current share price corresponds to 6.9 times Ppace E in 18max 19e, maintains a neutral rating, and downgrades its target price by 15.5% to 2.73 yuan (mainly due to slower-than-expected release of revenue and profit and reduced market risk appetite). The new target price corresponds to 6.4 times Ppace E of 7.5x18max in 19e, which corresponds to 8.8% upside of the current share price.
Risk
The progress of settlement is not as expected; the key layout of urban regulation and upgrading.
