Matters:
The company released its report for the third quarter of 2021. It achieved revenue of 63.68 billion yuan in the first three quarters, an increase of 33.4% over the previous year, and the net profit of the mother was 4.53 billion yuan, an increase of 2.0% over the previous year. The corresponding basic EPS was 0.80 yuan/share.
Ping An's point of view:
Performance has remained stable, and outstanding resources remain sufficient. The company's revenue for the first three quarters increased 33.4% year on year, and net profit increased 2.0% year on year. Net profit growth was lower than revenue growth mainly due to: 1) land price increases and government price limits led to a year-on-year decline of 5.7 pct to 19.5% in the period; 2) the number of unconsolidated projects settled during the period decreased, and the investment income of joint ventures fell 52% year on year to 360 million yuan; 3) Minority shareholders' profit and loss ratio increased 5.0 pct to 25.5% year on year. The company's operations continued to improve during the period, and the cost rate for the period fell 0.6pct to 8.3% year-on-year. Considering that the total value of contract liabilities and advance payments at the end of the period increased 8.0% from the beginning of the period to 145.45 billion yuan, 1.7 times 2020 revenue, combined with the planned completion growth rate of 30% for the whole year, laying the foundation for continued growth in performance.
Sales have slowed slightly, but the payback rate has reached 98%. As the property market came under pressure in the second half of the year, the company's sales slowed. The sales amount for the first three quarters was 146.3 billion yuan, down 0.7% from the previous year, achieving 58.5% of the annual sales target (250 billion yuan); sales repayment was about 143.5 billion yuan, with a repayment ratio of 98%; the sales area was 14.62 million square meters, up 2.9% from the previous year; and the average selling price was 10007 yuan/square meter, up 0.4% from the full year of 2020.
Investment efforts have shrunk, and diversified land acquisition has achieved remarkable results. The tight financial environment compounded sales pressure. The company contracted land acquisition efforts to ensure cash flow safety. During the period, 9.9 million square meters of land were added, with a total price of 38.7 billion yuan. The sales area and sales amount were 67.7% and 26.5% respectively during the same period. The land acquisition sales amount decreased compared to 34.5% in the first half of 2020 (39.9%); the average floor price during the period was 39909 yuan/square meter, and the land price ratio was 39.1%, slightly higher than the whole of 2020 (37.9%). The way companies acquired land became more diversified during the period, acquiring 5.83 million square meters of land through “real estate+commerce”, “real estate+industry”, mergers and acquisitions, etc., accounting for 59%.
Leverage continues to decrease, maintaining the “green level” level. During the period, the company actively reduced debt and optimized the term structure. The size of interest-bearing debt fell from 97.66 billion yuan at the end of last year to 87.59 billion yuan at the end of the period, a pressure drop of nearly 10 billion yuan; the share of interest-bearing debt of one year or more reached 76.6%. At the end of the period, the company had cash on hand of 30.17 billion dollars, and the short-term cash debt ratio reached 147.4%. The net balance ratio after excluding prepaid accounts and contract liabilities at the end of the period was 68.5% and 73.2% respectively, down 4.2 pct and 39.1 pct from the previous year. Net operating cash flow at the end of the period was 7.431 billion yuan, an increase of 569.77% over the previous year, continuing to meet the “three red lines” requirement. During the period, the company completed issuing 1 billion yuan of ultra-short-term financing notes, and the financing channels remained smooth.
Investment advice: Maintain the company's profit forecast. The estimated EPS for 2021-2023 will be 1.42 yuan, 1.62 yuan, and 1.81 yuan respectively. The current stock price corresponds to PE 3.1 times, 2.7 times, and 2.4 times respectively. Currently, the company's leverage continues to be optimized, and its operations are stable and orderly. At the same time, its land storage is of excellent quality and the layout is becoming more balanced and reasonable. The scale is expected to reach another level in the medium to long term. The five-year plan also clarifies the sales target of 450 billion yuan in 2025. Furthermore, the valuation is low, and the dividend rate is also attractive. They are optimistic about the company's subsequent performance and maintain the “recommended” rating.
Risk warning: 1) Recently, the downward pressure on the property market has been strong. If housing enterprises generally exchange price for volume in the future, it may pose a risk of depreciation of company projects. 2) Since 2016, due to the popularity of the property market, land prices have continued to rise, and price limit policies in various cities have been introduced one after another, and the company's gross margin will still face the risk of falling in the future; 3) In the context of frequent credit incidents among individual housing enterprises, if the financing environment in the subsequent industry does not significantly ease, the company's capital situation may be under pressure.