Incident: The company's report for the third quarter of 2020 revealed that the third quarter of 2020 achieved operating income of 38 million yuan, a year-on-year decrease of 86.2%, and the net profit of the mother in the current period was 151 million yuan, an increase of 28% over the previous year. In the first three quarters of 2020, the company achieved operating income of 182 million yuan, a year-on-year decrease of 91.32%, and net profit attributable to shareholders of listed companies was 292 million yuan, a decrease of 40.75% over the previous year.
Net profit recovered significantly in the third quarter of 2020, and the growth rate of investment income was impressive. In the first three quarters of 2020, the company achieved operating income of 182 million yuan, a year-on-year decrease of 91.32%, and net profit attributable to shareholders of listed companies was 292 million yuan, a decrease of 40.75% over the previous year. On a quarterly basis, the company's Q1, Q2, and Q3 revenue was 0.55, 0.89, and 38 million yuan respectively, YOY -68.21%, -94.61%, -86.23%, and net profit of the mother was 0.44, 0.97, 151 million yuan, and YOY -85.76%, 49.23%, and 27.97%, respectively. At the same time, the growth rate of the company's net profit has continued to be positive since 2020Q2. The company's net profit growth rate has continued to be positive, mainly due to 1) the financial assets held by the company were affected by market fluctuations. The fair value change earnings of 2020Q2 and Q3 were 81 million yuan and 62 million yuan respectively, a significant increase from -63 million yuan and -51 million yuan in 2019Q2 and Q3. 2) The company's net investment income from 2020Q1-3 was 455 million yuan, an increase of 74% over the previous year. The company was seriously affected by the epidemic, and the release of performance was delayed due to delays in settlement projects.
Both gross profit margin and net interest rate increased, mainly due to lower revenue. The company's gross profit margin and net interest rate for the third quarter of 2020 were 53.0% and 151.4% respectively. The year-on-year changes were +30.6 and +126.4 pct respectively. The gross margin and net interest rate fluctuated greatly due to too little carry-over revenue from the company. Sales, finance, and management fees have increased markedly, mainly affected by revenue. The company's sales expense ratio, financial expense ratio, and management expense ratio in the first three quarters of 2020 were 10.8%, 80.4%, and 34.7% respectively. The year-on-year changes were +10.0, +79.5, and +32.0 pct respectively, mainly due to a decrease in the company's real estate sales revenue. The company's financial expenses changed greatly. 2020Q1-3 was 146 million yuan, an increase of 127.5775 million yuan over the previous year, mainly due to the year-on-year increase in interest expenses.
Key projects have gradually entered the market, and sales performance has been gradually released since the second half of the year. The company signed an additional contract amount of 1,239 million yuan in the third quarter of 2020, adding 52,600 square meters of sales area. The Shanghai region accounted for 85% of the sales amount and 50.7% of the area. Among them, the company's key projects, Lu Xiang Yuan and Zhujiajiao, signed contracts worth 230 million yuan and 726 million yuan respectively, and the results delayed due to the epidemic began to be gradually released. As high-margin key projects such as Shangpu Lingshi gradually begin to contribute profits, it is expected that future performance will enter a harvest period and continue to improve.
Short-term debt remained stable, and debt repayment pressure was good. At the end of the reporting period, the company's interest-bearing debt balance was 18.034 billion yuan, an increase of 51.7% over the previous year. Among them, the sum of the company's short-term loans and non-current liabilities due within one year was 3.22 billion yuan, with a year-on-year growth rate of 34.0%. The ratio of long-term and short-term debt was 4.61. The structure was good. According to the “three red lines”, the balance ratio, net debt ratio, and short-term cash debt ratio of withheld accounts at the end of the reporting period were 56.27%, 53.06%, and 2.2 respectively. They were all below the red line, with changes of 15.6 pcts, 14.1 pcts, and 0.54 pcts respectively from 2019Q3. The company's debt pressure was good.
Investment advice:
As the main force in urban construction in Shanghai, the company continued to make efforts in the fields of old reform, infrastructure, and venture capital. Since the second half of the year, the company's real estate sales have gradually picked up, and investment income has grown brilliantly. With high-margin projects fully entering the market, the company's performance is expected to continue to improve. At the same time, Shanghai is promoting a second mixed reform. The company changed its standards once, and is expected to continue to benefit in the future. We expect the company's net profit for 2020-2022 to be 1,137 million, 1,614 million, and 2,193 million yuan respectively. The corresponding EPS will be 0.45, 0.64, and 0.87 yuan/share, and the corresponding PE will be 1,28X, 8.65X, and 6.37X, maintaining the “buy” rating.
Risk warning: Yangtze River Delta integration policy falls short of expectations, project revenue falls short of expectations