The performance is in line with the forecast, the profit is stable and the dividend payout rate is rising.
Jinyu Group (BBE) announced its 2021 results on March 24, with a net profit of 2.95 billion yuan, up 3.1% from a year earlier, within the forecast range of 2.85 billion-3.05 billion yuan announced on January 18.
The cash dividend was 1.1 billion yuan, and the dividend payout rate reached 37.9%, an increase of 15.4%. Excluding fair value changes and asset impairment, the recurrent net profit was 3.6 billion yuan, an increase of 6% over the same period last year. The reasons are: 1) the sales volume and ton gross profit of the cement business decreased; 2) the profitability of the real estate business began to recover moderately; 3) the financial expenses decreased; and 4) the non-operating income increased. We cut our net profit forecast for 22x23 by 28% to reflect falling cement sales and rising real estate profit margins. We lowered our target price by 3 per cent to HK $3.0, based on 0.4 times the 22-year forecast PB, in line with the average of the stock since 2016. Despite the challenging demand outlook, we find the valuation of the 22-year forecast PB 0.2x attractive. Maintain "buy". In 22-23-24, the annual EPS is predicted to be HK $0.26.
Cement: 2H21 sales fell sharply, gross profit per ton rebounded from the previous month
The pre-tax profit of 2H21 cement plate was 2.9 billion yuan, down 25.8 per cent from the same period last year. Under the influence of dual control of energy consumption and weak demand, 2H21 sales fell 20.7% year-on-year to 51.7 million tons (1H21: up 14.0% to 48 million tons). However, due to the sharp rise in 2H21 cement prices, which is more than offset by higher coal prices, the gross profit per ton rebounded to RMB 90 per ton from the previous month. Thanks to the implementation of off-peak shutdowns and the common goal of leading cement producers to maintain stable profitability in the industry, we expect gross margins to remain basically stable in 2022. However, given the challenging outlook on the demand side of 1H22, we expect 1H22 margins to remain under downward pressure.
Real estate: income is flat, profit margin tends to be stable
The real estate development sector broke even in 2H21, with a pre-tax profit of 56 million yuan. Excluding the one-time loss on inventory impairment, the pre-tax profit of the sector was 895 million yuan, an improvement from the same period last year (2H20: pre-tax loss of 148 million yuan). The carry-over income was 22 billion yuan, an increase of 0.6% over the same period last year, and the gross profit margin was 12.4%, an increase of 3.7% over the same period last year. The trend is stable but still at a low level. Due to the rapid cooling of the property market, contract sales fell 61.5 per cent year-on-year to 14.5 billion yuan, leaving the balance of pre-sale housing at 24.9 billion yuan, down 7.5 per cent from the same period last year, adding pressure on the sector's income outlook in 2022 while the real estate market is still depressed. By the end of 2021, the land reserve was 6.97 million square meters, down 5.5% from the same period last year, due to the company's slow pace of land acquisition.
Risk tips: 1) the real estate policy tightened more than expected; and 2) the coordinated implementation of the industry is not as expected.