Main points of the report
Event description
Chongqing Development (000514) announced today the first quarterly report of 2016: the company realized operating income of 150 million yuan in the first quarter of 2016, an increase of 7.70% over the same period last year, net profit of-5 million yuan, an increase of 74.54% over the same period last year, and net profit margin of-3.18%, an increase of 10.27% over the same period last year, EPS-0.01yuan.
Event comment
The increase in gross margin contributed to the improvement of net profit. The company's operating income and net profit rose 7.70% and 74.54% respectively in the first quarter of 2016 compared with the same period last year. The reason for the obvious improvement in net profit is that the gross profit margin of the current period increased by 15 percentage points to 26.83% compared with the same period last year, or because the low gross margin projects such as the Shangcheng era were carried forward into the final period. As the high-margin projects have entered the carry-over period, the company's net profit is expected to turn into profit. In addition, with the official opening of Xiyong project in the first quarter and the first phase of Xinghe ONE project in the second quarter, the company's future sales performance can be expected.
It is proposed to issue medium-term notes to speed up the development of the company. By the end of the reporting period, the company's asset-liability ratio was only 54.61%, the same as at the end of last year. The net debt ratio is 19%, a low level that has lasted for nearly two years. The company announced in April that it planned to issue no more than 330 million yuan of medium-term notes, which is expected to accelerate the company's development, with a monetary coverage of 0.91 in the first quarter of 2016.
The company is expected to continue to benefit from the improvement of the property market in Chongqing. Since the end of 2014, the sales area of commercial housing in Chongqing has obviously exceeded the new salable area, new construction area and completed area, and the inventory situation of the property market in Chongqing has gradually improved, and the property market in Chongqing has continued to maintain this good condition since the beginning of 2016. At present, the company's main projects are Yunling, Mountain and City in Nanan District, Grammy City in Xiyong Software Park and Xinghe ONE project as the main sales projects, with superior location and good quality. Under the improved inventory situation in Chongqing, the company will benefit more obviously.
The China-Singapore strategic project exchange meeting was held to reiterate the company's expectation of land revaluation. On April 16, 2016, a demonstration meeting on promoting strategic connectivity between China and New Zealand (Chongqing) was held in Chongqing. Speaking of the Zhongxin (Chongqing) project, Chen Zhensheng, minister of the Prime Minister's Office of Singapore, said at the meeting that the project would promote "China's access to the second engine of economic growth other than manufacturing". Huang Qifan, mayor of Chongqing, explained in detail the financial cooperation of the China-Singapore (Chongqing) project.
After the substantive landing of the China-Singapore cooperation project, the company has the expectation of land revaluation in the projects such as Jiangbei Airport, Xinghe ONE near Xiyong Software Park and Grammy City.
Investment advice: we expect the company's 2016 results to benefit from the improvement in the Chongqing property market, with an estimated EPS of 0.262 yuan per share in 2016 and 0.298 yuan per share in 2017, with a corresponding share price PE of 32.27 and 28.37 times, maintaining a "buy" rating.
Risk hint: the real estate cycle fluctuates and the landing of the China-Singapore cooperation project falls short of expectations.