Maintaining the “buy” rating, the target price is HK$31.00: The company's sales scale is growing steadily. Based on 10% CAGR, the sales amount will exceed 400 billion yuan by 2023. The company has a perfect land storage layout and strong resilience to risks. By the end of the year, the total land storage had reached 81.75 million square meters, with more than 100 cities. The financial situation was good, and all three red lines had been met by the end of the year. The company maintains a strong dividend payout rate (40+% payout rate), and the current dividend yield is 7.4%. We expect the company's core net profit for 2021/2022 to be 139.4/15.87 billion yuan, an increase of 13.5%/13.8% over the previous year. We maintained our “buy” rating and lowered the target price from HK$46.00 to HK$31.00, corresponding to 7/6 times PE in 2021/2022.
Gimu Core's net profit increased 17% year on year, and the performance was in line with expectations: in 2020, the company achieved operating income of 135.3 billion yuan (same below), an increase of 21% over the previous year; Guimu Core's net profit was 12.3 billion yuan, up 17% year on year. Gross margin was 29.3%, down 1.3 percentage points from the previous year; the core net margin was 9.1%, down 0.3 percentage points from the previous year. The annual dividend payout was HK180 cents per share, an increase of 24% over the previous year. The total annual dividend payout was 5.4 billion yuan, accounting for 44% of core net profit, maintaining a strong dividend payout.
Sales grew steadily, maintaining rational expectations: the company achieved sales of 30.3 billion yuan and sales area of 17.13 million square meters in 2020, with year-on-year increases of 15% and 17%, respectively. The average sales price was 17,536 yuan/square meter, a year-on-year decrease of 1%. The sales target for 2021 was 330 billion yuan, an increase of 10% over the previous year. The annual saleable value is 550 billion yuan, and the corresponding removal rate target is 60% (actual removal rate in 2020:63%).
Perfect layout and sufficient land storage: In 2020, the company added a total of 100 projects, with a planned area of 15.35 million square meters, mainly concentrated on H1 land acquisition (accounting for about 80%). The total land price was 90.8 billion yuan, and the average land acquisition cost was 5916 yuan/square meter. As of 2020, the company has laid out more than 100 cities, with a total land reserve of 81.75 million square meters, an increase of 6% over the previous year. It can be developed for at least three years in the next three years. The overall average cost of land is 5188 yuan/square meter.
All three red lines were met: As of 2020A, the company's net debt ratio was 50.3%, down 9 percentage points from the previous year. The average cost of financing was 5.6%, the same as the previous year. As of 2020A, the company's on-book cash was 68.5 billion yuan, and interest-bearing debt was 145.2 billion yuan, of which short-term debt accounted for 25%, and short-term cash debt ratio was 1.2 billion yuan. By the end of the year, the balance ratio excluding advance receipts was 68.1%, falling below 70%, and all three red lines met the standards.
Risk warning: macroeconomic growth is slowing down; industry regulation policies are being tightened; liquidity is tightening; corporate sales fall short of expectations; commercial and hotel operations fall short of expectations; RMB depreciation.