The current situation of the company
We have recently investigated the fundamentals of the company and updated the main points of the company as follows.
Comment
The sales end is accelerated and is expected to exceed the sales target of 15 billion yuan for the whole year. In the first quarter of 2019, the company's contracted sales increased by 52% year-on-year to 2 billion yuan, and sales rebate increased by 19% to 1.7 billion yuan. We expect that under the support of the salable value of more than 30 billion yuan, the company is expected to exceed the sales target of 15 billion yuan (corresponding to a 25% year-on-year growth rate) for the whole year.
Actively replenish the soil storage resources of strong second-tier cities. Since the beginning of the year, the company has obtained three cases of residential land in Chongqing and Shijiazhuang respectively, with a total construction area of 600000 square meters, corresponding to a cost of 4.8 billion yuan, and has completed half of the land investment plan of that year (10 billion yuan). We estimate that the amount of land taken by the company for the whole year is likely to exceed this target. The company plans to continue to cultivate high-quality second-tier cities such as Xi'an, Changsha and Chongqing in the future, and actively cooperate with leading housing enterprises to supplement high-quality resources.
Leverage upward, but the financing channels are diversified and smooth, and the cost-side advantage is highlighted. As land expansion continued to accelerate, the company's net debt ratio rose 52 percentage points to 196% at the end of the first quarter from the beginning of the year. Since the beginning of the year, the company has successively issued 1.5 billion yuan of privately raised bonds / 1 billion yuan of privately raised bonds / 300 million US dollars of overseas US dollar bonds / 500 million yuan of short-term financing bonds at a coupon rate of 6.65% 6.50% 8.50% 3.94%. It has also announced that it intends to issue bonds of no more than 3 billion yuan to supplement cash on hand, and will actively explore financing channels such as ultra-short financing in the future. In 2018, the company's comprehensive capital cost was 5.77%, which remained low in the industry.
The dividend ratio is expected to be more than 30%. The company paid a dividend of 0.12 yuan per share in 2018, with a dividend payout rate of 38% (32% and 29% respectively in 2016-2017) and a corresponding dividend yield of 4.5%. We expect the company to maintain a dividend ratio of no less than 30% in 2019.
Valuation proposal
We keep the company's 2019e earnings per share forecast unchanged and introduce 2020e earnings per share forecast of 0.41 yuan.
The company's current share price trades at 7.1amp 6.5 times 2019amp 2020e, maintaining a neutral rating and raising its target price by 13% to 2.82 yuan (mainly due to acceleration of company sales and reserve expansion). The new target price corresponds to 7.5x2019x2020e target price-earnings ratio and 6% upside space.
Risk
The main layout of urban regulation and control policies are tighter than expected; the settlement progress of real estate business is not as expected.
