I. Overview of events

Daming City released its 2019 annual report. In terms of settlement, the company achieved operating income of 13.043 billion,-2.54% compared with the same period last year, and the net profit of shareholders belonging to the parent company was 744 million, + 35.03% of the same period last year.

Second, analysis and judgment.

The structure of reserve value is good to ensure the elimination of sales.

The structure of the salable value of the company is relatively good, and more than 70% of the value is concentrated in the southeast coast and the Yangtze River Delta. The better layout makes the company better. In 2019, the company achieved a sales area of 103.44 million square meters, with a sales amount of 18.896 billion yuan, a year-on-year increase of + 31.61%, and a sales rebate of 16.041 billion yuan. From the perspective of settlement, the gross profit margin of the company's real estate business is 27.02%, the net profit rate is 7.65%, and the profitability is above the industry average.

The development is relatively steady, and the financing continues to improve.

The company adheres to the basic strategy of "paying equal attention to profit and scale, and profit-oriented", and its development is relatively sound; at the end of 2019, the company's operating cash flow continued to recover, with an asset-liability ratio of 65.98%, a net debt ratio of 46.96%, and an interest-bearing debt ratio of 25.07%, which is at a low level in the industry; the company's financing cost remains at 8.16%. In addition to traditional financing methods, it actively develops financial instruments such as corporate bonds and asset securitization.

Set up an employee stock ownership plan to demonstrate confidence in development

On February 12, the company announced the establishment of a win-win development employee sustainability plan with a total fund of 300 million yuan. according to the latest implementation announcement, the plan has bought a total of 31.8756 million shares through secondary bidding from February to March, of which 29.1256 million shares were bought from March 2 to 6, with an average price of 6.53 yuan per share, further demonstrating the company's confidence in future development.

In the future, it will change from "endogenous growth" to "equal emphasis on endogenous growth and epitaxial growth".

From the perspective of the company's future development direction, the company will adopt a more open and diversified cooperation model to achieve a rapid increase in scale and layout, vigorously develop the market advantages of the Yangtze River Delta with Shanghai as the core and the southeast region with Fuzhou (including Xiamen) as the core; develop the landing of the Dawan area project with Guangzhou and Shenzhen as the core.

III. Investment suggestions

The company's reserve layout is good, and it is predicted that the company's earnings per share in 20-22 years will be 0.4,0.53,0.67 yuan, corresponding to PE 19.7,15.0,11.8 times; according to the earnings forecast, the company's performance growth rate in the next three years will be significantly higher than the historical average, similar to the rapid release period from 2013 to 2015, but the current company valuation level is significantly lower than the historical average; the first rating, given a "recommended" rating.

Fourth, risk tips:

1, the improvement of real estate policy is less than expected; 2, the uncertainty of external risk is increased.