The current situation of the company
Huaxia Happiness disclosed the announcement that its subordinate companies obtained the land use right in June 2020, and we update the company's point of view as follows.
Comment
The end of land acquisition continues to speed up, and new business is actively acquired. In the first half of the year, the company added a new land storage area / amount of 4.71 million square meters per 24.2 billion yuan, an increase of 13 percent respectively over the same period last year (sorted out according to the monthly announcement), and the average floor price increased 74 percent to 5128 yuan per square meter, mainly due to the company's new commercial projects in core cities and a significant improvement in the energy level of land acquisition. The proportion of land acquisition in 1H20 first-and second-tier cities increased significantly to 75 percent (24 percent in the same period last year). In the first half of the year, the company obtained a number of commercial projects, such as Nanjing Campus, Zhongbei Road in Wuhan, Songbei New area in Harbin, Baietan Industrial Financial Services Innovation Zone in Guangzhou, etc., and the main structure of Block An of Beijing Lize Ping an Happiness Center was capped, and new business development and development were actively promoted.
Overall sales are still weak, and production and development revenue for the whole year is expected to continue to grow. The company's contract sales fell 38% year-on-year to 39.5 billion yuan (Kerry caliber) in the first half of the year, down 51% in the first quarter and 27% in the second quarter. We believe that the decline in the company's sales compared with the same period last year is mainly due to insufficient push, and the settlement revenue of the industrial park has not increased significantly. In terms of the annual dimension, we expect that the growth rate of the company's real estate sales may still be under pressure (102.9 billion yuan in 2019). Benefiting from the settlement of more than 200 billion yuan of unlanded investment in the park, production and development revenue is expected to record growth.
Leverage is expected to continue the downward trend, financing channels are diversified and smooth. The company's net debt ratio at the end of 1Q20 is 201%, down 6 percentage points from the beginning of the year, and we expect the net debt ratio to be below 200% by the end of the year. Since the beginning of the year, the company has raised 1.5 billion yuan in two medium-term bills, with coupons of 5.17% and 5.50% for 2-year and 3-year bills, respectively. The company announced that it intends to raise no more than 5 billion yuan from Ping an for the aged in the form of sustainable bonds, and plans to issue bonds not exceeding 2.05 billion US dollars to replenish funds abroad.
Valuation proposal
Keep the profit forecast unchanged. The company's current share price trades at 4.4 pound 3.5 times 2020 pound 2021e. Maintain the outperform industry rating, raising the target price by 11% to 22.46 yuan (excluding rights and interest), mainly due to market risk preference upside. The new target price corresponds to a target price-to-earnings ratio of 4.0 times 2020 pound for 2021 and an upside space of 13%.
Risk
The scope and extent of COVID-19 's epidemic situation exceeded expectations; financing policies tightened more than expected; and regulation and control policies in major cities tightened more than expected.