Core viewpoints
The company is the only A-share real estate platform under China Communications Construction Group, which is expected to benefit from the resources and financing support of the whole industry chain of the group. Since 2015, the company has made concerted efforts in land acquisition and sales, focusing on the core second-tier cities with high land storage quality. Li Yongqian, a former Greentown core executive, has taken office to accelerate market-oriented reform, and the company is expected to usher in a period of comprehensive growth. We forecast that the EPS from 2020 to 2022 will be 1.46,1.83,2.30 yuan, covering for the first time and giving a "buy" rating.
Management: since 2015, the real estate integration of the group has accelerated. With the integration of China Housing Group into China Communications Construction Group in 2010, the real estate business of Zhongjiao Group has been deeply integrated into China Communications Real Estate Group in 2015. the company is the only A-share listing platform of the real estate group. The company's full-caliber sales amount reached 29.4 billion in 2016, and the CAGR reached 103% in 2019-2019, showing the true nature of the dark horse. From 2016 to 2019, the CAGR of land acquisition reached 37.8%, and the number of cities expanded rapidly from 5 in 2015 to 24 in 2019, all of which are located in the first-and second-tier cities of the five major urban agglomerations mainly in the Yangtze River Delta and Chengdu and Chongqing. In 2019, the uncompleted land storage is 9.29 million square meters, with an estimated value of about 131.9 billion yuan, which meets the development and sales needs of 2.5 years, and has a strong ability of sustainable development.
Finance: the performance is flexible, and the background of central enterprises builds financing advantages.
In recent years, the company's sales management expense rate has continued to return to the industry average, and high sales growth has led to a continuous release of performance. From 2016 to 2018, revenue and return net profit CAGR reached 100.4% and 205.4% respectively. Due to the combined influence of carry-over structure, reduced interest capitalization rate, minority shareholders' profit and loss diversion and asset impairment, homing net profit declined in 2019, but we believe that with the gradual carry-over of high-quality projects in the future, performance growth is expected to return to the growth track. The overall level of the company's debt ratio is higher than the industry average, but the net debt ratio has gradually dropped from the previous high, and the overall financial structure is healthy. The cash coverage multiple has been maintained above 1.8 for a long time. 2019 long-term debt accounted for 65.6% of the "joint rating" upgraded the company's main body rating in June 2019, the central enterprise background superimposed scale expansion accelerated, and the financing advantage is expected to continue to appear.
Management: the group promotes great-leap-forward development, and the change of platform coach injects new vitality.
China Communications Construction Group made it clear that it will make every effort to promote the rapid development of Zhongjiao Real Estate Group by leaps and bounds. In the early years, Li Yongqian, the core figure of the first batch of executives stationed by China Communications Construction Group in Greentown, successively served as president and chairman of the company in 2019. Since taking office, he has launched a comprehensive reform and is active in financing and land acquisition. In addition, the reform of state-owned enterprises of China Communications Construction Group has been accelerated, and Zhongjiao Real Estate Group has been included in the list of "two hundred enterprises". In the future, the reform has been deepened at the management level, and the group has also promised to gradually solve the problem of inter-industry competition, gradually start the deep integration of other housing-related enterprises and Zhongjiao Real Estate before 2021, and coordinate the differential operation of Greentown China and Zhongjiao Real Estate.
Small stature and big dream, covering and giving a "buy" rating for the first time
We estimate that the company's current share price is 50.6% off the RNAV share price. We predict that the EPS from 2020 to 2022 is 1.46,1.83,2.30 yuan. Comparable company's average PE in 2020 is 5.8 times, and the company has made full efforts in land storage and sales since 2015. it is expected to release performance flexibility under the leadership of the new management. We believe that the company's reasonable PE valuation in 2020 is 7-7.5 times, with a target price of 10.22-10.95 yuan.
Cover for the first time, giving a "buy" rating.
Risk tips: epidemic development uncertainty, industry policy risk, industry downside risk, business risk.