The current situation of the company
We recently participated in the company's anti-road show. Since the beginning of the year, the company has actively cashed solid soil storage resources into front-end sales, while taking the land cautiously, with low land intensity and tenacity in profit margin and equity ratio. We believe that the company is continuing to carry out its plans to stabilize the basic market, consolidate quality and improve financial performance. Considering that the company's share price has fallen 12% since the beginning of the year, the current trading price-earnings ratio is 4.5 times forward earnings, which is lower than the historical negative-multiple standard deviation, and corresponding to dividend yields of 10.0% and 11.5% this year and next, we believe that its valuation has a thick cushion. And the company's initial disclosure of the spin-off listing plan of the business management sector in the reverse performance is expected to give an additional boost to the stock price performance. Reiterate that it outperforms the industry rating and target price of HK $29.91 (6.4 times 2021 price-to-earnings ratio, 44% upside).
Comment
Sales are expected to slightly exceed the target in 2021. We believe that Shimao's sales are expected to exceed the target of 330.1 billion yuan this year, with a year-on-year growth rate of 10-15%, of which the completion rate in the first half of the year is expected to exceed 45%. In addition to the sufficient and high-quality goods available for sale (up 15% to 550 billion yuan compared with the same period last year), considering that the first-and second-tier and strong third-and fourth-tier markets account for 87% of the market, considering that the physical market is expected to be strong for the whole year under the support of credit conditions, we expect the company to do well. On the other hand, the company's sales quality is resilient. We estimate that the year-to-date gross profit margin is 26-27% (compared with 28% last year). The equity ratio is stable at about 60% of the land and strictly adheres to the investment scale, supporting further improvement on the financial side. Since the beginning of the year, the company has acquired a total of nearly 20 pieces of land, with a total consideration of about 20 billion yuan, of which only 5-6 pieces come from bidding, while others are contributed by private channels, such as mergers and acquisitions of small and medium-sized developer projects, urban renewal and land application, etc. We estimate that the value of the new land is about 55 billion yuan, the gross profit margin is about 26-27%, and the net profit rate is about 8-10%. Considering that the intensity of land acquisition is only about 16% since the beginning of the year, we think that the company can still maintain the "green gear" under the "three red lines" in the medium term.
In addition, the average financing cost can also be stable at around 5.6% at the end of last year, making it competitive.
Non-housing business is developing rapidly, in which the potential spin-off of the business management plate provides benefits. Even affected by the epidemic, non-housing income in 2020 increased by 3396 to 8.63 billion yuan compared with the same period last year, reaching 99 per cent of the annual target. Seeing that in 2021, we expect non-housing revenue to increase significantly to about 15 billion yuan, driving the contribution of revenue from 6.8% to 9.1% (5.6% in 2019). In this anti-roadshow, the company disclosed its preliminary plan to spin off the business management sector. it expects that the transaction will be completed in the second half of 2022 or faster than the spin-off of the hotel management sector. At the end of 2020, the company has 32 projects run by management companies, all of which are self-owned properties. It is expected that 28 new projects (including light assets) will be opened in 2021-24.
Valuation and suggestion
We keep our earnings forecasts, ratings and target prices unchanged. The company is currently trading at 4.5amp 3.9 times 2021 Universe 2022.
Risk.
Xiaobai Maimai Inc's policy on developer financing has been tightened.