The company released its annual report for 2018, with operating income of 7.942 billion yuan, down 8.23% from the same period last year, and net profit of 447 million yuan, a decrease of 27.41% SPS 0.67 yuan over the same period last year.
The increase in expenses and impairment during the period suppresses the performance of the company: the main reasons why the net profit margin is lower than the gross profit margin are as follows: 1. The cost of the period has increased significantly, and the proportion of sales management expenses and financial expenses in revenue has increased by about 4.6pct to 16.2% compared with the previous year. 2, some projects set aside 377 million yuan for inventory decline, accounting for about 40% of the company's total profits. In 2018, sales reached 13.17 billion yuan, down 9.1% from the same period last year, and 87% of the sales target was achieved. The low target completion rate of the company is mainly due to the delay in the push rhythm due to the management of the pre-sale certificate. The company's sales target in 2019 was 15.2 billion yuan, an increase of 15.4%. We believe that all the cities in the company's layout are first-and second-tier and surrounding strong third-tier, and the demand is expected to be released under the policy relaxation environment since the beginning of the year. The company will also benefit from environmental improvement in achieving its performance targets.
The pace of land acquisition has slowed down, with heavy holdings in Guangdong, Hong Kong, Macao and Chengdu-Chongqing economic circle: 70.2 million square meters of new capacity has been added during the reporting period, a decrease of 57% over the same period last year, and the pace of land acquisition has slowed down significantly. As of the end of 2018, the land reserve is about 4.6 million square meters, which is roughly available for three years of development, and the land reserve of rights and interests is about 3.63 million square meters, with an equity ratio of about 79 percent. In terms of rights and interests, the four major regions of Guangdong, Hong Kong and Macao, Chengdu and Chongqing, the Greater Shanghai Metropolitan area and the Bohai Rim account for 43%, 41%, 7% and 8%, respectively.
The weakening of investment led to a decline in the level of debt: due to the reduction of investment and the optimization of debt structure at the end of the reporting period, the pressure on short-term debt fell by 0.54 to 0.52 from the previous year, while the net debt ratio fell by 96pct to 74 per cent from the previous year.
Real estate funds have made substantial progress, the incentive mechanism has been improved, and shareholders have increased their holdings to demonstrate confidence: the "real estate + finance" model has become a useful supplement for companies to obtain projects and expand their scale. In terms of leasing business, the leasable property area of commercial and office buildings in 2018 is about 218,000 square meters, with an average occupancy rate of 91%. In terms of property management, the contracted management area exceeded 6 million, an increase of 41.6% over the same period last year. Equity incentives will be implemented in March 2018, with the number of incentive shares accounting for about 3% of the total equity. In addition, the controlling shareholder Zhongzhou Land and the concerted actors have cumulatively increased their holdings in the company by 2% from May to December 2018, fully demonstrating the controlling shareholders' confidence in the future development of the company.
Profit forecast and investment rating: we expect the company's EPS to be 0.93 yuan in 2019 and 1.20 yuan in 2020, maintaining a "buy" rating.
Risk hint: the risk that the real estate regulation and control policy continues and the settlement speed is not as fast as expected should be considered.
