Main points of investment
The performance growth is remarkable, the profitability is steady. In 2020, H1 Company achieved operating income of 9.62 billion yuan, + 146.3% compared with the same period last year, and the scale growth effect is beginning to show. In the same period, the gross profit was 2.43 billion yuan, + 115.0% compared with the same period last year; the net profit was 900 million yuan, + 23.5% year-on-year; the core net profit was 870 million yuan, + 80.7%; and the core net profit was 660 million yuan, + 30.7%. The corresponding gross profit margin / net profit rate / core net profit rate is 25.3%, 9.3%, 9.1%, respectively, compared with the same period last year-3.7/-9.3/-3.3PCT. As of 2020H1, the company has a contract liability of 23.6 billion, corresponding to a revenue guarantee factor of 1.6 X (current contract liability / 2019 revenue).
The optimization of sales area and product structure leads to a rise in volume and price, which is likely to achieve the annual sales target of 75 billion yuan.
2020H1 achieved sales of 31.6 billion yuan, + 4.4% year-on-year; the average price was 14642 yuan / flat, + 13.6% year-on-year. The company focuses on high-energy urban agglomeration, accounting for 86% of sales in second-tier cities in the first half of the year, and 77% in the Yangtze River Delta. In addition, the company targets customers over the age of 30, focusing on improving products with 3 rooms and above. In the second half of the year, the sales value of the company can be 87.8 billion yuan, 49% removal rate can achieve the annual sales target.
National layout, focus on deep ploughing. The company adheres to the deep ploughing strategy and ranks 12th in the "sales list of Jiangsu Province in the first half of the year" in the competitive market environment. At the same time, the company has accelerated its national layout. by the end of June 2020, the company had a total land reserve of 1837 square meters, up 8.5% from the end of 2019, and about 76% were located in second-tier cities. In the first half of the year, the company took 21 new plots, with a total capacity of 3.07 million square meters, with a floor price of about 6408 yuan per square meter. The new projects are distributed in 17 cities such as Nanjing, Suzhou, Chengdu and so on.
Optimization of financial structure. By 2020 H1, the company's net debt ratio was 68.7%, year-on-year-7.3 PCT; short-term loans accounted for 36.8%, year-on-year-5.2 PCT; cash on hand was 18.28 billion yuan (corresponding to cash short-debt ratio 1.54X). The debt structure of the company has been optimized and the risk of short-term debt repayment is low.
Investment suggestion: over the years, the company has been deeply cultivated in the Yangtze River Delta metropolitan area, gradually transforming from a "small and beautiful" regional housing enterprise to a "residential + commercial" two-wheel drive national developer. In recent years, the company has high sales growth and excellent land reserves, while commercial operations have accumulated industry-leading scale and brand effect. we are optimistic about the potential of sustained sales growth in the future, as well as the great development of stock business such as business management and property management. The EPS for 2020-2021 is 0.59 yuan and 0.75 yuan respectively, corresponding to PE 4.0 and 3.1 times, raising the target price to HK $3.25, maintaining the "highly recommended" rating.
Risk hint: the impact of COVID-19 epidemic exceeded expectations, the decline in industry sales exceeded expectations, and policy control was less than expected.