Core viewpoints
According to the company's semi-annual report, revenue in the first half of 2019 was 7.319 billion yuan, + 13.7% compared with the same period last year; net profit was 500 million yuan,-39.7%; weighted average ROE was 3.9%,-3.9% year-on-year; and the company's performance was lower than expected, mainly affected by low gross margin, low equity and other carry-over structure of the real estate business. Considering the completion in the second half of the year and the relatively high share of the stock push plan, the annual performance growth rate is expected to be repaired smoothly. Maintain the profit forecast of 0.70,0.80,0.96 yuan for EPS from 2019 to 2021, and maintain the "buy" rating.
The settlement structure leads to the decline of gross margin, and the low equity ratio is a drag on earnings growth.
In the first half of the year, the carry-over income of the company's real estate development business was + 11.8% to 6.54 billion yuan compared with the same period last year, driving total revenue from + 13.7% to 7.32 billion yuan, achieving a net profit of 500 million yuan,-39.7% compared with the same period last year. The lower-than-expected performance of the company is mainly due to 1. Affected by factors such as the carry-over structure, the gross profit margin of the real estate business fell to 30.4% from the same period last year, which dragged down the comprehensive gross profit margin to 28.0%. The equity ratio of the carry-over project decreased during the reporting period, and the proportion of minority shareholders' profit and loss in net profit increased sharply by 19.8 percentage points to 30.7%. The completed area of the company in the first half of the year is 664,000 square meters, accounting for 29.6% of the completion plan for the whole year. With the increase in sales in the second half of the year and the gradual carry-over of cooperative development projects, the company's profit growth is expected to be repaired.
Push pace affects sales growth and expand high-energy cities in the Yangtze River Delta.
In the first half of 2019, the company achieved a sales area of 817,000 square meters,-23.7% compared with the same period last year, and the sales amount was 10.53 billion yuan,-22.5% compared with the same period last year. In the first half of the year, the new construction area of 303.3 million square meters, + 52.6% compared with the same period last year, has exceeded the planned target for the whole year. With the steady entry of new projects into the market and the continuation of new construction in the second half of the year, the sales value for the whole year may exceed expectations, driving a moderate recovery in sales growth. In the first half of the year, the company added 122.9 million square meters of land storage area, + 61.5% compared with the same period last year, continued to maintain a high investment intensity, and the new resources were mainly concentrated in high-energy cities in the Yangtze River Delta. According to the 2018 annual report, Shanghai accounts for 18% of the company's unsettled resources (including 100000 square meters of unsettled construction area of the free trade zone near Hong Kong + 60,000 square meters of cold storage) and 65% of the Yangtze River Delta, which is expected to benefit from the promotion of the integration strategy of the Yangtze River Delta.
Actively explore financial innovation, financing advantages are expected to be maintained
In the first half of the year, the company raised 4.2 billion yuan at low cost through the issuance of ABS, sustainable winning tickets, medium-term notes, cold-chain warehousing and logistics ABS, ultra-short-term financing bonds and other innovative ways. High-intensity land investment led to an increase in the asset-liability ratio excluding accounts received in advance by 10.6pct to 73.0% compared with the same period last year, and the coverage rate of monetary funds to short-term liabilities was-19.1pct to 50.8% year-on-year, and the pressure on long-term and short-term debt repayment increased. Considering the background advantages of the company's local high-quality state-owned enterprises and the credit endorsement of Guangming Group, the company is expected to maintain a good financing advantage, and with the gradual realization of a new round of high-quality resources, the debt ratio is expected to improve steadily.
Obvious local advantages, close coordination of diversity, and maintain the "buy" rating.
With the help of local advantages, the company's real estate main business is expected to deeply expand the development areas of the old reform, indemnificatory apartment, Chongming Island and other areas, cold chain logistics is expected to achieve close coordination of the industrial chain, while the group's high-quality resources have room for follow-up integration and docking. Taking into account the company's sales growth in the second half of the year is expected to repair, the completed area still has upward space, maintaining the profit forecast of 2019-2021 EPS of 0.70,0.80,0.96 yuan. With reference to the comparable company's PE valuation of 7.9 times in 2019, and considering that the company's expected earnings growth rate is lower than that of the comparable company, we believe that the company's reasonable PE valuation level in 2019 is 6.5-7.5 times, with a target price of 4.55-5.25 yuan (the previous value is 7.00-7.70 yuan), maintaining a "buy" rating.
Risk hints: the pace, scope and intensity of industry policy promotion are uncertain; the decline in real estate fundamentals may be a drag on company sales; land reserves are low; and rapid debt growth brings pressure on the capital chain.