Core viewpoints
According to the company's three-quarter report, revenue in the first three quarters of 2018 was 9.401 billion yuan, down 13.55% from the same period last year; net profit was 1.012 billion yuan, up 68.72% from the same period last year; and the weighted average ROE increased by 2.78% to 9.42% over the same period last year. The company's performance is in line with our expectations, the gross profit margin of the settlement project is higher, the new construction has increased significantly, and continue to replenish the available resources. Maintain the profit forecast of EPS of 0.83,0.92,1.05 yuan from 2018 to 2020, and maintain the "buy" rating.
The profit margin of the settlement project is relatively high, and the return net profit is high in the first three quarters.
The completed area of the company fell 67.34% in the first three quarters of 2018 compared with the same period last year, resulting in a small carry-over area of the real estate business and a 13.55% decline in revenue from the same period last year. However, the profit level of the settlement project in the third quarter was relatively high, with a single-quarter gross profit margin of 45.2%, coupled with the sale of high-margin commercial real estate projects at 58-88 Lishui Road in Shanghai in the first quarter. the company's gross profit margin in the first three quarters rose 17.8 percentage points year-on-year to 35.99%, resulting in a 68.72% year-on-year increase in net profit. At the end of the third quarter, the accounts received in advance totaled 15.095 billion yuan, an increase of 80.95% over the same period last year. According to the carry-over pace of the company over the years, it is expected that the carry-over scale in the fourth quarter will be greatly improved compared with the previous quarter.
Sales were dragged down in Jiangsu, Zhejiang and Shanghai, and new construction increased significantly.
According to the prospectus for the first phase of interim notes of Guangming Real Estate Group Co., Ltd., by the end of the first quarter of 2018, Jiangsu, Zhejiang and Shanghai accounted for 62.50% of the company's saleable construction area, accounting for 73.47% of the saleable value. Affected by the changes in the regional real estate market environment, the company achieved a sales area of 137.42 million square meters in the first three quarters of 2018, down 10.42 percent from the same period last year; the sales amount reached 17.364 billion yuan, an increase of 11.87 percent over the same period last year. In order to increase the sales scale and accelerate the elimination and payback, the company has stepped up new construction efforts. In the first three quarters of 2018, the new construction area was 260.54 million square meters, an increase of 120.72 percent over the same period last year, exceeding the target of 2.28 million square meters of new construction for the whole year set at the beginning of the year.
Continuously replenish the marketable resources, there is the potential to dock the group's resources.
According to the company announcement, in the third quarter of 2018, the company or its subsidiaries successively won seven plots in Shanghai, Chongqing, Nanning, Suzhou, Changzhou and other cities, with a total planning capacity of 95.33 million square meters and a total land price of 11.367 billion yuan. The average floor price is 11924 yuan per square meter. The company continues to replenish marketable resources, and is expected to continue to take advantage of the advantages of the group to seek new business opportunities in the renovation project of indemnificatory apartment and urban villages in Shanghai, the development of 2000 mu of land in Chongming Island, and the docking of land and warehousing resources of brother companies within the group.
The overall development business is stable, maintaining a "buy" rating
The company is the only real estate listing subject of Guangming Group, and it is also an important source of performance of the Group. We believe that the company's real estate business has the potential to dock with the group's resources, and is expected to obtain high-quality land and achieve steady performance growth by accelerating turnover. We maintain the profit forecast of RMB 0.83,0.92,1.05 for 2018-2020 EPS. With reference to the comparable company's 7.0x PE valuation in 2018, the company lowered the reasonable PE valuation level in 2018 to 5.56.0x (the previous value 6.5x-7x), lowered the target price to RMB4.574.98RMB (the previous value 5.40Mel 5.81 yuan), and maintained the "buy" rating.
Risk hint: the salable value is relatively low; the level of debt rises rapidly, and the capital chain may face some pressure; there is a downward risk of sales growth in the real estate industry, which may be a drag on company sales.