Main points of investment
Our view: the company began to push more goods in late August, and the cumulative year-on-year growth rate of sales in the next few months will continue to grow, so it will be easy to achieve the 140 billion sales target for the whole year. In the first half of the year, the company maintained the strength of land acquisition, mainly invested in the first-and second-tier cities in six strategic areas, and the scale of land storage increased steadily. In addition, the company's financial situation continued to improve and optimize, the net debt ratio and financing costs further reduced, and the proportion of short-term debt and high-interest non-bank loans decreased significantly. The company's current share price is seven times 2019's PE and a dividend yield of 2.1%.
Core net profit fell 6 per cent year-on-year, and the performance was in line with expectations: 2020H1 achieved operating income of 14.5 billion yuan (the same below), up 7 per cent from a year earlier. Core net profit was 800 million yuan, down 6% from the same period last year, mainly due to an increase in effective tax rates (a reduction in deferred taxes) and an increase in minority shareholders' equity. The gross profit margin was 20.3%, unchanged from the same period last year; the core net profit margin was 5.8%, down 0.8 percentage points from the same period last year.
Since July, the cumulative sales amount has become regular year-on-year: by August, the company has realized contract sales of 81.9 billion yuan and 5.32 million square meters, an increase of 3.4% and 3.9% over the same period last year, the cumulative average sales price is 15389 yuan / square meter, and the current sales completion is 58%. The sales amount in the first half of the year is distributed by region, with the six major regions, namely, the Yangtze River Delta, Hercynian, the west, the Bohai Rim, the Pearl River Delta and the central part, accounting for 46%, 25%, 6%, 12%, 1% and 10%, respectively.
The proportion of new land rights and interests remains more than 60%: by the end of August, the company has added a total of 5.48 million square meters of land reserve, the proportion of rights and interests is 64%, and the amount of land is 39.7 billion yuan, accounting for 48% of the sales amount, which is higher than the average level of the industry. the average cost of acquiring land is 7233 yuan / square meter. As of 2020H1, the company's total land reserve was 2740 million square meters, an increase of 4.9 percent from the end of 2019.
Further improvement in financial security: the company's leverage continued to decline, with 2020H1's net debt ratio at 71.4%, down 3.8% from the end of 2019. The average financing cost was 7.0%, down 0.5 percentage points from the end of 2019. As of the medium term, the company has paper cash of 39.8 billion yuan and interest-bearing liabilities of 63.6 billion yuan. Of this total, short-term liabilities accounted for 30%, down 4 percentage points from the end of 2019, while bank loans, non-bank loans, corporate bonds and preferred bills accounted for 51%, 9%, 7% and 33%, respectively.
Risk hints: macroeconomic growth slows, industry restrictions tighten, liquidity tightens, commercial housing sales fall short of expectations, and RMB depreciates.