1H19 earned 0.08 yuan per share, up 216% from the same period last year, exceeding expectations.
Huayuan Real Estate announced 1H19 results: operating income of 1.6 billion yuan, an increase of 19% over the same period last year, and net profit of 190 million yuan, an increase of 211% over the same period last year, corresponding to a profit of 0.08 yuan per share, exceeding our expectations.
The performance has more than tripled from a low base compared with the same period last year, resulting in a high return on investment. In the first half of the year, the company's income increased by nearly 20% compared with the same period last year, and the gross profit margin increased by 3.3% to 22.8% compared with the same period last year. Investment income increased by 127% to 170 million yuan (mainly due to the settlement of non-consolidated project profits, and the investment income of associated enterprises increased by 133% to 150 million yuan). The higher-than-expected growth rate of the company's performance in the first half of the year is mainly due to a low base in the same period last year (1H18 net profit of 60 million yuan). With the improvement of the base in the second half of the year, we expect the growth rate of net profit to narrow to nearly 20% for the whole year.
The acceleration of land expansion leads to an upward net debt ratio, and the advantage of the financing side is highlighted. During the period, the company's land expansion accelerated and operating expenses increased. The operating cash outflow was 5.9 billion yuan, an increase of 23% over the same period last year. The cash on hand at the end of the period decreased by 42% compared with the beginning of the year, resulting in an increase of 114 percentage points in the net debt ratio at the end of the period. In the first half of the year, the company raised 3.5 billion yuan in three three-year private bonds at a coupon rate of 6.0% to 6.7%, raised US $300 million in a 2.5-year US dollar bond at a coupon rate of 8.5%, and raised 500 million yuan in one-year short-term financing bonds at a coupon rate of 3.9%. Financing channels are diversified and smooth, and financing costs remain low in the industry.
Trend of development
Annual sales are expected to exceed the sales target of 15 billion yuan. In the first half of the year, the company's contract sales / contract sales area increased by 43% to 6.1 billion yuan / 490000 square meters respectively compared with the same period last year, and the corresponding average sales price increased by 12% to 12551 yuan / square meters. We estimate that the company is expected to exceed its sales target of 15 billion yuan (a year-on-year increase of 25%) under the support of more than 30 billion yuan of saleable value.
We will actively replenish the high-quality resources of strong second-tier cities and speed up the completion of projects in the second half of the year. During the period, the company obtained five residential projects in Shijiazhuang, Chongqing and Yinchuan at a total cost of 5.6 billion yuan, with a total planned construction area of 1.13 million square meters, and the company plans to complete a land investment of 10 billion yuan for the whole year. We expect that the company will continue to supplement high-quality soil storage resources in strong second-tier cities in the second half of the year. The company plans to complete the new construction area / completed area of 1.74 million square meters / 850000 square meters in the whole year, and has completed 1.18 million square meters / 80,000 square meters respectively during the period. We expect the completion of the company to be accelerated in the second half of the year.
Profit forecast and valuation
Keep the company's earnings per share forecast for 2020 unchanged. The stock is currently trading at 5.7 times 2019 Universe 2020 P / E. Maintain the neutral rating, raise the target price by 8% to 2.45 yuan (mainly due to the acceleration of the company's land sales), and the new target price corresponds to 6.5pm 5.9 times the 2019T 2020 target price-to-earnings ratio and 4% upside.
Risk
The main layout of urban real estate regulation and control policies tightened more than expected; the settlement progress was lower than expected.
