In 19 years, earnings growth was lower than expected, and dividend payout rate increased significantly.
For the whole year of 19, the core net profit attributable to shareholders increased by 27.3% to 3.18 billion yuan compared with the same period last year, which was 18.4% and 8.3% lower than our and market consensus forecasts, respectively. Revenue rose 49.7 per cent year-on-year to 51.46 billion yuan, and adjusted net profit margin (excluding joint venture income) rose to 9.7 per cent from 7.5 per cent in 18 years, mainly due to: 1) gross profit margin rose from 23.5 per cent to 24.2 per cent; 2) SG&A 's share of income fell from 7.2 per cent to 5.2 per cent. The core net profit margin attributable to the company fell from 7.3 per cent to 6.2 per cent, mainly due to a 135.7 per cent year-on-year increase in profit attributable to non-controlling interests. The company recommends a full-year dividend of HK $0.60 per share, an increase of 64.4% over the same period last year, and a dividend yield of about 30%, up from 22% in 18 years. The total debt reached 63.18 billion, basically the same as at the end of last year; the short-term debt ratio decreased from 39.7 per cent to 29.6 per cent, the coverage ratio of cash to short-term debt increased from 1.0x to 1.8x, and the average financing cost dropped from 7.1 per cent to 6.9 per cent. The financial soundness of the company has been further improved.
Continue to focus on first-and second-tier cities, conservatively estimate that sales will achieve 10-12% sales growth in the next 3 years, 19 years of steady sales growth, land pace to maintain caution: 1) sales increased 15.9% year-on-year to 141.3 billion yuan, sales area increased 16.5% year-on-year to 6.55 million square meters, the average sales price was 21583 yuan per square meter, and the payback rate exceeded 80% 2) 46 plots were acquired in 19 years, with a total land amount of 36.8 billion yuan, with a saleable area of 730.5 million square meters, with an average floor price of 6648 yuan per square meter, equivalent to 30.8% of the average sales price. 3) by the end of 19, the land reserve had increased by 6% year-on-year to 2690 square meters, more than 80% in first-and second-tier cities. Over the past 20 years, the company's salable value is about 220 billion. According to the company's historical removal rate of 70%, contract sales are expected to reach 1540 yuan, an increase of 9% over the same period last year. Consider: 1) the company's current land storage is mainly located in first-and second-tier cities; 2) the brand is competitive in middle and high-end improved housing; 3) the future real estate policy tends to be moderate and stable. We think the company has a high probability of sales growth of 10% and 12% in the next three years. In addition, the company has successfully reduced leverage, with cash on hand rising 37% year-on-year to 34 billion yuan at the end of 19 years. We believe the company is in a better position to cope with the possible land acquisition window in 20 years.
The profit forecast was lowered, the target price was lowered to HK $12.0, and the buying rating was maintained due to 1) the impact of the epidemic; 2) the growth of land reserves was slower than expected; and 3) the non-controlling interest was higher than expected, we lowered the 21-year net profit forecast for 20 pounds to 3.64 billion / 4.46 billion respectively. Taking into account the company's growth, debt risk and dividend payout ratio, we maintain a positive view of the company's fundamentals. As a result of the lower earnings forecast, we lowered our target price to 12.0 accordingly, corresponding to a 20-year PE of about 5.0x and a dividend yield of 5.8%. The target price has an increase of 71.2% corresponding to the current price, and we maintain our buy rating.
Risk tips: (1) substantial tightening of real estate policy; (2) RMB exchange rate