Company profile:
Yincheng International is a real estate developer specializing in residential properties in the Yangtze River Delta. The company's real estate development began in Nanjing and expanded to other cities in the Yangtze River Delta region (including Wuxi, Suzhou, Zhenjiang, Hangzhou, Maanshan and Hefei). The company has 31 property projects in eight cities, with a total construction area of about 3.43 million square meters, of which the property projects developed by subsidiaries in Nanjing have a total construction area of 1.652 million square meters, accounting for 39.4% of the land reserve. Since 2002, Yincheng International has been rated as one of the top 50 enterprises in Jiangsu real estate development industry by Jiangsu Real Estate Association for 16 consecutive years, and ranked second in 2017. According to the ranking of a number of research institutions, Yincheng International ranked 93rd among the top 100 real estate enterprises in China in 2018, and was named one of the top ten real estate developers in Jiangsu Province in the same year.
Sino-Thai point of view:
The Yangtze River Delta region has huge market growth potential and a wide variety of residential properties: Yincheng's international business scope is mainly located in Jiangsu Province, especially in Nanjing. At the same time, it radiates the Yangtze River Delta and lays out key areas. Supported by many market driving factors, such as stable economic development, purchasing power of urban residents, accelerated urbanization, the transformation of shantytowns and the development of metropolitan groups, the residential property development market in the Yangtze River Delta has great potential for growth. From the perspective of residential projects, the types of properties include high-rise residential buildings, multi-storey residential buildings and low-density foreign houses. Positioning to provide high-quality development properties to full-age customers, for different customer groups, the introduction of five residential property product series.
In terms of operating results: Yincheng International's earnings rose steadily in 2015, 2016 and 2017, which were about HK $24.46, HK $29.28 and HK $54.7, respectively. From 2015 to 2017 and October 31, 2018, the company's gross profit margin was 30.8%, 34.8%, 16.8% and 27.6%, respectively. The decline in gross profit margin in 2017 was mainly due to the low gross margin level of the two projects delivered during the period. After that, the revenue contribution of the new Yee series residential "Junyi Oriental" project developed for elderly customers to enjoy a relaxed and healthy life increased in 2018. Bring gross profit margins back to historical levels. At the same time, the capital-debt ratio increased significantly by 380.1% in the 10 months ended October 31, 2018, mainly due to an increase in the company's land reserve and property development activities for related projects that have not yet begun pre-sale. This shows from the side that the company may have problems in the return of funds, and there is a certain pressure to repay the debt.
Valuation: based on 1.4 billion shares after the global public offering, the market capitalization of the corresponding company is HK $28.34-3.514 billion, which is lower than that of its Hong Kong counterparts; the corresponding price-to-earnings ratio is about 6.27.7 times, slightly higher than the industry average; and the price-to-book ratio is about 1.091.27 times, higher than the industry average. In terms of profitability, the ROE and ROA of 17 years were 20.45% and 2.61% respectively, higher than the industry average. Taking into account the company's industry status, performance and valuation, we give it a score of 60, with a rating of "neutral".
Risk hints: (1) market competition risk (2) market policy risk