Sales picked up further in April, with sales figures hitting a record high.
1) in April 2020, the company realized contract sales of 65.21 billion yuan, an increase of 11.6% over the same period last year; the contract sales area was 713.0 million square meters, an increase of 28.5% over the same period last year; the monthly sales rebate was 64.65 billion yuan, an increase of 70.8% over the same period last year. April contract sales amount and payback data set a new record for the same period in the company's history.
2) from January to April 2020, the company realized contract sales of 212.57 billion yuan, an increase of 19.4% over the same period last year; the contract sales area was 2371.1 million square meters, an increase of 43.0% over the same period last year, with a cumulative sales rebate of 178.2 billion yuan, an increase of 60.8% over the same period last year. The contract sales amount and payback data from January to April are the highest in the company's history for the same period.
The sales target for 2020 is 650 billion yuan, which has been completed by 32.7%. The company announced in the 2019 Annual report that the sales target for 2020 is 650 billion yuan, and 32.7% of the sales target has been achieved from January to April.
The conversion of shed to special debt is expected to restart, which is good for the layout of the company's third-tier cities. According to the 21st Century Economic report quoted by Sina Finance on May 6, the issuance of special bonds for shed reform is expected to resume, and some places are already combing the list of projects. Specific requirements include "1, only support started projects, and shall not be used for monetized resettlement projects; 2, shed reform projects must be included in the annual shed reform plan tasks; 3, shed reform project information is consistent with the relevant material elements information". By the end of 2019, the company had distributed 237 cities across the country, with land reserves in third-tier cities accounting for 33%. We believe that if the special debt is restarted, it will support the company's layout in third-tier cities.
Profit forecast: we expect the company's total revenue from 2020 to 2022 to be about 553.4 billion yuan, 625.4 billion yuan and 695.3 billion yuan respectively. We estimate that the gross profit margin from 2020 to 2022 will be 30.005%, 29.00% and 29.00% respectively, and the net profit will be 27.9 billion yuan, 32.1 billion yuan and 36.1 billion yuan respectively.
Investment advice: give a rating of "better than the market". We estimate that the EPS in 2020 and 2021 will be 2.11 yuan and 2.42 yuan respectively. As of May 11, 2020, the company closed at HK $15.12 (RMB13.83), corresponding to a PE of 6.55 times in 2020, 5.71 times in 2021, and a 20-year PEG of 0.18. Considering that the special bonds for shed reform are expected to start again, and the superimposed company has excellent sales from January to April, we raise the company's 2020 target valuation to 9-10XPE, with a reasonable value range of HK $20.77-23.08 (RMB18.99-21.10) and a "better than the market" rating.
Risk hint: the company faces the downside risk of the real estate industry fundamentals; the company's third and fourth line project sales are not as expected; the settlement is not as expected. Full text 1 HKD = 0.9144 RMB.