The 21-year profit performance was lower than expected.
The company's 21-year net profit attributable to shareholders fell 34% year-on-year to 3.26 billion yuan (the same below), 41.2% lower than our forecast and 34.8% lower than the consistent forecast. Revenue increased by 13.1% to 43.64 billion yuan over the same period last year, property development / urban renewal business / property rental revenue increased by 18.5% over the same period last year, and the overall gross profit margin decreased to 27.6% from 28.8% in 20 years. This is mainly due to the decline in the gross profit margin of the property leasing business and the decline in the proportion of income in urban renewal business with higher gross margin. The SG&A-to-income ratio fell from 7.0% in 20 years to 5.0% in 21 years. Other expenses increased by 149.4% year-on-year to 1.209 billion yuan, mainly due to increased provisions for impairment of inventory and exchange losses. The share of the joint venture's net profit decreased from 445 million in 20 years to 346 million yuan in 21 years. The overall tax rate rose from 43.3% in 20 years to 49.9% in 21 years. The non-controlling interest increased from 425 million in 20 years to 1.494 billion in 21 years. Net profit margins attributable to shareholders fell from 12.8 per cent in 20 years to 7.5 per cent in 21 years.
By the end of 21, the net debt ratio / cash to short debt ratio (excluding restricted cash) / adjusted asset-liability ratio reached 78.6% / 1.2 x / 74.6% respectively, which remained basically robust compared with the end of 20 years; the average financing cost further decreased to 6.6% from 7.3% in 20 years.
It has maintained reasonable and abundant soil reserves for 21 years, and pursued quality development for 22 years. In 2021, the company's contract sales fell 4.8% to 96.5 billion yuan compared with the same period last year. By the end of 21, the company's total land storage construction area was 1994.4 million square meters, down 7.6 percent from the same period last year; the salable value was about 300 billion yuan; by region, 69.9 percent were located in nine cities of Guangdong-Hong Kong-Macau Greater Bay Area, 9.1 percent in other second-tier cities (Changsha, Hangzhou, Wuhan, Chengdu, Nanjing), and 21.0 percent in other cities in Guangdong Province; the total old reform reserve reached 4003.1 million square meters, with an estimated total potential value of about 1 trillion. The company seeks steady development in 2022, with goal 1) to achieve contract sales of 65 billion billion yuan; 2) to complete the transformation of about 8 old projects; and 3) to achieve all three red line targets to turn green by the end of the year.
The profit forecast is lowered, the target price is lowered to HK $4.33, and the buy rating company still faces some pressure on the maturity of short-term debt. however, we believe that the company's land reserves and old reform resources are concentrated on Guangdong-Hong Kong-Macau Greater Bay Area, and the project resources are reasonable and abundant. It is expected to support the steady development of the company, and the company's financial risks are expected to further converge. Taking into account the slowdown in the company's sales pace and the decline in net profit margin, we cut our profit forecast for 22Lex23 by 50.1% to 3.356 billion / 3.367 billion. Considering the macro environmental impact, the growth of the real estate industry has declined, and we have switched to the NAV valuation method. We have lowered the target price to HK $4.33, a 70% discount for NAV of HK $14.4 per share, a 22-year PE of 2.2x and a 22-year PB of 0.3x. The target price has 39.2% room to rise against the previous closing price, and we reiterate our "buy" rating. Risk tips: (1) sales fall short of expectations; (2) RMB exchange rate volatility increases; (3) short-term stock price volatility is high.