Seize the opportunity of the Yangtze River Delta to achieve great-leap-forward development
Dexin China was founded in 1995, with Hangzhou as the center and ploughing Zhejiang. During the 13th five-year Plan period, the construction of the core metropolitan area represented by the Yangtze River Delta and the Pearl River Delta accelerated, and the company seized the opportunity of the rapid development of the Yangtze River Delta region. full-caliber contract sales rose from 28.71 billion in 17 years to 63.53 billion in 20 years, and the unit price rose 11.4% to 20401 yuan per square meter in 2020 compared with the same period last year. In 18 and 19, the company took advantage of the marginal cooling window of the land market to carry out national layout and entered the core cities of Chengdu, Wuhan, Nanjing, Shanghai, Wuxi, Kunshan, Guangzhou, Foshan and other core cities, laying the foundation for the company's future development; during this period, the floor price / current selling price ratio remained below 40%. By the end of June 20, the company had a total land reserve of 1570 square meters, with an equity ratio of 40.1%, of which 9.82 million square meters could be sold, which could be used for the company's development in the next 3-4 years. The strategy of the 14th five-year Plan metropolitan area will be further deepened, and we judge that the company will continue to benefit from the population inflow from the core cities, and is expected to achieve a 20% compound growth rate of contract sales in 20-22 years. In addition, the company's comprehensive development and operation capacity has also been steadily improved, and the competitiveness of the land market is expected to be further enhanced.
Balance sheet continues to improve
As of mid-20 years, the company's total debt reached 23.11 billion, up 36.4% from the end of 1919. Since listing, the company's debt structure has improved significantly: 1) the short-term debt ratio has dropped from 63.5% at the end of 18 years to 39.9% in mid-20 years. 2) the proportion of related party loans and loans from other financial institutions (trusts, asset management, etc.) has decreased from 68.2% in 18 years to 31.0% in mid-20 years. The proportion of bank loans to foreign bills in total debt increased from 31.8% in 18 years to 69.0% in mid-20 years. The net debt ratio fell from 276% at the end of 17 years to 76% in mid-20 years. 4) the ratio of cash to short debt reached 1.44x as of mid-20 years. We believe that the main reasons for supporting the continued improvement in the balance sheet are: 1) significant growth in profitability and thickening of equity. The attributable net profit increased from 330 million in 16 years to 1.56 billion in 19 years, and the CAGR reached 67.6%. 2) the project removal rate and payback rate are high, reaching 83% and 91% respectively in the first half of 20 years, which are higher than the industry average. 3) the company actively opens up new financing channels, and its financing capacity continues to strengthen. Looking ahead to 20-22e, we expect the company's net debt ratio to be maintained at around 80%, and comprehensive financing costs are expected to fall further as the debt structure further improves.
Estimated core net profit 20-22 3-year CAGR 9.7%
It is expected that revenue will rise from 9.51 billion in 19 years to 21.87 billion in 22 years, and the overall gross profit margin of CAGR 32% CAGR9.7% will drop slightly to 25.4%, 26.4% and 26.4% in 22 years. Net profit attributable will rise to 2.05 billion in 22 years.
The dividend yield is more attractive, with a target price of HK $3.50 and a "overweight" rating.
The company's closing price on January 11th corresponds to 4 times 21-year PE, 0.94 times 21-year PB and 8.0% 21-year dividend yield, which is attractive. We believe that the company's layout of the core urban agglomeration is expected to achieve a steady increase in sales and profits. We use the relative valuation method to give the company a target price of HK $3.50, corresponding to a 21-year PE of 4.8x. We estimate that the company's net asset value per share is about HK $5.2, and the target price corresponds to a 32.0% discount on the net asset value per share, which is within a reasonable range. The target price has an increase of 18.6% corresponding to the current price, and we give it an "overweight rating". Risk hints: 1) the economic recovery is not as expected; 2) the outbreak of public health events; 3) substantial tightening of financing policies; 4) RMB exchange rate fluctuations