Report highlights
Description of the event
The company achieved contract sales of 601.06 billion yuan for the full year of 2019, successfully achieving the sales target at the beginning of the year.
Incident comments
The annual sales target has been successfully completed, and the company's leading position is stable. In December 2019, the company achieved sales of 20.47 billion yuan, an increase of 26.91% over the previous year; the sales area was 2,124,000 square meters, an increase of 36.94% over the previous year.
The company achieved a total sales amount of 601.06 billion yuan throughout the year, an increase of 9.02% over the previous year, and successfully achieved the 600 billion sales target set at the beginning of the year; achieved a sales area of 584.63 million square meters, an increase of 11.50% over the previous year.
The company's annual sales ranking is the same as in 2018, ranking third in the country under Crerey's caliber, and the leading position is still stable. The company's sales target for the full year of 2020 was 650 billion yuan, an increase of 8.14% over the actual value in 2019. Sales continued to maintain a steady growth rate, demonstrating the company's confidence in development. Referring to the implementation of the company's current land storage and sales plans over the years, it is estimated that the sales target of 650 billion yuan in 2020 may be exceeded.
Prices have declined slightly but are generally stable, with plenty of low-cost soil storage to guarantee long-term profits. The company's average monthly sales price from September to December 2019 was lower than the same period in 2018. On the one hand, the decline in average prices may be related to changes in energy levels in driving cities, and on the other hand, the company may compromise on sales prices in order to achieve promotional repayment. However, from the perspective of cumulative average sales price, the company's average sales price for the full year of 2019 was 10,281 yuan/square meter, a slight decrease of 2.23% from 2018, and the overall performance remained stable. In the context of overall financing tightening, the company successfully achieved a balance between profit and scale through moderate concessions to maintain sales scale and repayment rate. In terms of land storage, as of mid-2019, the company had 319 million square meters of land storage, with about 53.3% of the area distributed in Tier 1 and 2 cities, and the average land acquisition price was only 1,639 yuan/square meter. In addition, the company also had old renovation projects that did not include land storage totaling 70.12 million square meters. Abundant and low-cost land reserves strongly guarantee the company's long-term sales and profits.
Comprehensive strategic cooperation with China Railway Construction has created a model for win-win cooperation between central enterprises and private enterprises. On December 26, 2019, Evergrande Group and China Railway Construction reached a comprehensive strategic cooperation. The chairman, president and other executives of both parties attended the signing ceremony. The two sides have a good foundation of cooperation and a high degree of business compatibility. This strong partnership will achieve complementary advantages and resource sharing in industry, capital, brands, etc., jointly open up market space in various industrial fields, and create a win-win model for cooperation between central enterprises and private enterprises. Specifically, after this cooperation, the company may benefit from project acquisition, standardization of building assembly and cost control, capital replenishment, and reduction of financing costs.
Investment suggestions: Sales targets have been successfully completed, and a win-win situation will be created jointly with China Railway Construction. The sales target has been successfully completed, and the steady growth rate of the target for the new year shows the company's confidence; abundant low-cost soil storage guarantees long-term profits, and cooperates with China Railway Construction to create a win-win situation. Net profit attributable to the mother in 2019-2020 is estimated to be 303 billion yuan and 33.1 billion yuan respectively, up 19% and 9% respectively. Currently, PE is 8.63 and 7.90 times, maintaining the “buy” rating.
Risk warning: 1. The liquidity environment may be uncertain;
2. There is some uncertainty about the choices that will follow in the war.