Introduction to this report:
The gross margin of many of the company's businesses declined rapidly in the first half of the year, and the urban renewal business fell short of expectations, and there was a sharp decline.
In the first half of the year, operations maintained a high growth rate. Land was replenished in due course, and land storage remained at a relatively rich level.
Summary:
The company achieved revenue of 35.17 billion yuan in the first half of 2021, an increase of 13.3% over the previous year; net profit reached 6.18 billion yuan, an increase of 1.8% over the previous year. The Sandao Red Line Company remains fully green in its third tier, but its gross margin has declined rapidly. We expect the company's revenue growth rates to be 25.2% and 20.2% respectively in 2021-2022; net profit growth rates of 19.7% and 20.2% respectively; corresponding EPS growth rates are 3.19 yuan and 3.48 yuan respectively.
The gross margin of many of the company's businesses declined rapidly in the first half of the year, lower than market expectations, but it was still ahead of the industry level. The company's gross margin in the first half of the year was 26.9%, down 8.3 pct and 3.1 pct respectively from the same period in 2020 and the whole year; net interest rate was 17.6%, down 2.1 pct and 0.7 pct respectively from the same period in 2020 and the whole year. The decline in net profit margin was mitigated by a change in the fair value of the property owned by the company of 1.3 billion yuan. In addition to the development management business, the company's traditional property development, urban renewal business, and holding operation business all experienced a decline in gross margin, down 4.3 pct, 9.6 pct, and 13.7 pct respectively from the same period in 2020. The decline was fast and slightly lower than expected.
Settlement accelerated, but urban renewal business fell short of expectations. In the first half of 2021, the company's settlement revenue reached 27.67 billion yuan, an increase of 34.2% over the previous year; while the urban renewal business reached 2.90 billion yuan, a year-on-year decrease of 51.6%. The settlement rate of property development remained at a high level, with settlement area and amount increasing by 44.1% and 34.2%, respectively, over the same period last year. However, revenue from the urban renewal business declined rapidly, slightly lower than expected, and its share of the revenue structure fell to 8.3% from 19% in the first half of 2020.
Sales in the first half of the year achieved high growth, and land investment was strong. In the first half of 2021, the company achieved equity sales of 73.6 billion yuan, an increase of 58.9% over the previous year. In the first half of the year, the company added 3.63 million square meters of land storage, with an investment intensity of about 39.7%, and strong investment. By the end of the first half of 2021, the company's overall land reserves reached 85.56 million square meters. The total value of goods is expected to be about 1.6 trillion yuan. The company's overall land storage is quite rich.
Risk warning: Insufficient demand caused sales to fall short of expectations, and urban renewal business incubation fell short of expectations.