1Q21 performance meets expectations
Lujiazui announced 1Q21 results: operating income 2.9 billion yuan, year-on-year-29%; return to the mother net profit 900 million yuan, year-on-year + 16%, in line with our expectations.
The gross profit margin continued to rise and the profit and loss share of minority shareholders fell sharply. Thanks to the continued carry-over of high-margin projects, 1Q21's after-tax gross margin increased to 59 per cent (47 per cent and 55 per cent, respectively, in 2019-20). The profit and loss of minority shareholders of 1Q21 fell sharply to 160 million yuan (570 million yuan for 1Q20), and its share of after-tax profits fell 64ppt to 15% compared with the same period last year (26% and 20% respectively in 2019-20).
The holding business is basically stable. At the end of 1Q21, the rental rates of the company's Class An offices in Shanghai / Tianjin were respectively 8.65 2ppt/+3ppt 3.45 yuan / square meter / day compared with the end of 2020-2ppt/+3ppt to 78% Universe 1Q21, which was-2% / day the same as that for the whole year of 2020.
Development trend
Sales increased rapidly in the first quarter and are expected to remain stable in 2021. The residential projects sold by 1Q21 are mainly Donghe apartment, Jinxiu Guanlan Phase I, Tianjin Marine Garden Phase II, Suzhou 15 Land Phase II, with a sales amount of 2.1 billion yuan, which is significantly higher than that of 1Q19 (300 million yuan) and 1Q20 (100 million yuan). By the end of 1Q21, the cumulative removal rate of the above-mentioned projects on sale reached 75% (59% at the end of 2020). In 2021, the company will make great efforts to promote the sale of items on sale in stock. At the same time, the second phase of Chuansha project is expected to contribute to the increase. We expect the company's annual sales to be basically the same as that in 2020 (6.7 billion yuan).
Rental income in the first quarter became regular year-on-year and is expected to return to pre-epidemic levels throughout the year. 1Q21 realized a cash inflow of 960 million yuan for real estate leasing, + 9.2% year-on-year (- 9.4% and-9.1% respectively in the last and second half of 2020), and 820 million yuan for equity leasing, + 10.6% year-on-year.
Looking ahead, taking into account the gradual fading of the impact of the epidemic, market demand is expected to pick up, superimposed by the steady increase in the occupancy rate of Lujiazui Riverside Center, Qiantan Oriental Plaza Phase I, and the orderly promotion of investment in Tower An of the "Gate of Science". We expect the company's rental income in 2021 to return to 2019 levels (3.95 billion yuan), corresponding to a year-on-year growth rate of about 10%.
Profit forecast and valuation
Keep the earnings per share forecast for 2021 to 2022 unchanged. The current A share price corresponds to 10.4 times 2021 pound's 2022 forecast price-to-earnings ratio, while B share price corresponds to 5.7max 5.3 times 2021 / 2022 forecast price-to-earnings ratio. A-share maintains its neutral rating and keeps its target price unchanged at 12.62 yuan, corresponding to 11.8 times 2021 Unix 2022 forward price-to-earnings ratio, which has 14% upside compared to the current stock price. B shares maintain a neutral rating, leaving their target price unchanged at $0.88, corresponding to 5.1 times 2020max's 2021 price-to-earnings ratio, with 4% downside from the current share price.
Risk
The progress of pushing and dismantling is not as expected; the recovery of holding business is not as expected.