The performance maintains high growth, and the increase in advance payment ensures future performance.
According to the company's annual report for 2017, the company's operating income for the whole year was 10.244 billion yuan, an increase of 16.87 percent over the same period last year, and the net profit belonging to shareholders of listed companies was 1.411 billion yuan, an increase of 67.98 percent over the same period last year. The main reason why the growth of net profit is significantly faster than that of operating income is the significant increase in investment income. By the end of 2017, the balance of the company's accounts received in advance totaled 7.251 billion yuan, an increase of 1.916 billion yuan over the beginning of the period. For the whole year, the signed area was 1.4022 million square meters, down 3.30 percent from the same period last year, and the signed amount was 15.055 billion yuan, an increase of 9.26 percent over the same period last year.
According to the business plan disclosed in the company's annual report, it is planned to achieve an increase of not less than 30% in real estate sales in 2018 over the previous year, with a start-up area of 3.4585 million square meters and a completed area of 107.47 million square meters.
The average financing cost and each expense rate continue to decline, the improvement of ROE is obvious, the company sales expense rate, management expense rate and average financing cost all show a downward trend, and ROE has increased significantly in the past two years. Since 2015, companies have continued to replace traditional high-cost financing through capital market financing methods such as private equity bonds, with the average corporate financing cost falling from 9.8% in 2015 to 6.5% in 2017. In addition, the company's sales expense rate and management expense rate have also declined year by year, driving the company's ROE to increase from 8.45% in 2015 to 12.45% in 2017.
The land reserve is abundant, and 65% of the outstanding value is located in Fujian and East China.
The company's land reserve is abundant, and we estimate that the outstanding value of the company by the end of 2017 is 90.3 billion yuan, of which East China accounts for 13.5%, Fujian accounts for 51.4%, and Lanzhou only accounts for 35.1%. The company's unsettled area reached 8.61 million square meters, of which Lanzhou accounted for 63.5%, Fujian accounted for 33.2%, and East China accounted for 3.3%. Lanzhou area accounts for a high proportion, but because the unit price is cheap, so the proportion of goods value is not high. The high-quality land reserve has laid a solid foundation for the company's future performance growth.
The rapid development of the financial control plate under the premise of strict risk control is expected to become a new performance growth point. The financial control plate is expected to develop rapidly. Business revenue increased by 44.7% year-on-year to 1.211 billion, accounting for 13.8% of the total business income. By the end of 2017, the total assets under management of Mingcheng Financial Control Group reached 11.2 billion yuan, including 8.2 billion yuan for medium-term leasing, 2.1 billion yuan for securities investment, 550 million yuan for equity investment and 350 million yuan for financial investment.
CCTV (834641) 4.2 million shares held by Kangsheng Investment, a securities investment platform of Mingcheng Financial Control Group, completed the guidance registration of initial public offering and listing in May 2017. Huanghe property Insurance Co., Ltd., which is the second largest shareholder of the company, has obtained business approval and applied for industrial and commercial business license at the beginning of 2018. Changan Caitong Asset Management Co., Ltd., and Guorong Securities Investment Fund projects invested by the company are in good operation. The medium-range leasing of famous City Financial Holdings does well and strengthens the business of direct leasing, sale and leaseback, and entrusted loans, while optimizing the industrial structure of leasing business, exploring innovative business models, and steadily expanding new business areas such as debt-equity linkage and equity investment.
Investment suggestion: the company's land reserve is sufficient, with an outstanding value of more than 90 billion yuan; the average financing cost and the rate of management and sales expenses continue to decline, laying a solid foundation for performance growth. The financial control plate is developing rapidly and is expected to become a new performance growth point. The company's RNAV is 12.47 yuan per share, and the current share price is reduced by 41.68%. We estimate that the company's EPS from 2018 to 2020 will be 0.61,0.79 and 1.01 yuan, corresponding to PE 11.9x, 9.3x and 7.2x, with a "buy" rating for the first time and a six-month target price of 8.73yuan.
Risk tip: sales are not as expected, and the development of financial control business is not as expected.