Events:
The company released its mid-2020 report that its operating income was 4.28 billion yuan, an increase of 20.59% over the same period last year, and its net profit was 203 million yuan, down 48.3% from the same period last year.
Income grew steadily, gross profit margin was dragged down by high prices, and management efficiency began to improve.
2020H1, the company's confirmed income from real estate development reached 3.64 billion yuan, an increase of 19.43% over the same period last year, and projects in East and Central China entered the delivery period; after tax, the gross profit margin fell 7.54pc to 18.87%, mainly due to the high base factor and the drag on the delivery of some high land price projects; the rate of sales management expenses decreased 6.3pc compared with the same period last year, and the sales management expenses / on-balance sheet rebate decreased 0.7pc, and the management efficiency improved.
As of 2020H1, the company (contract liabilities + accounts received in advance) is about 27.7 billion yuan, equivalent to about 136% of revenue TTM coverage, with a solid basis for short-term carry-over.
The pace of management has gradually accelerated, and sales and land acquisition have turned positive.
2020H1 returned 10.1 billion yuan in its statement, down 8% from the same period last year, of which Q2 was + 4% year-on-year (Q1 was-21%), and Jiuzhangfu, a key project in Hangzhou, was a hot seller. According to CRIC data, the company's full-caliber sales from January to July totaled 29.6 billion yuan, narrowing the year-on-year decline to-1%, ranking among the TOP59 of the industry.
2020H1 has 14 new projects with a planned capacity of about 1.7 million square meters and an estimated supplementary value of about 30 billion yuan, mainly located in Chengdu, Wuhan, Suzhou, Ningbo and other first-and second-tier cities. As of 2020H1, the company has a total of 32 land reserves to be developed, with a secondary planning capacity of about 3.57 million square meters, more than 79 projects under development and an uncompleted area of about 1773 million square meters.
The financial structure remains sound, and multiple financing channels are initially restored.
As of 2020H1, the company's net debt ratio fell 8pc to 55% from the beginning of the year, leverage maintained a healthy level, the short-term debt ratio fell to about 40%, and the debt structure continued to optimize. In April, the company successfully issued 1.16 billion yuan CMBS of Chengdu SAC Building, with a coupon rate of 8%. Multiple financing channels may be further developed in the second half of the year.
Valuation and rating:
Considering the impact of the epidemic on project delivery and the short-term drag of previous high prices on gross profit margin, we downgrade the company's forecast EPS to 0.71,0.85 yuan (originally 0.84,1.01 yuan) from 2020 to 2021, and introduce a forecast EPS of 0.98 yuan in 2022. The pace of operation of the company has accelerated, the open market financing channels have been gradually restored, and the fundamentals have shown signs of improvement. Comprehensively consider giving a valuation of 6 times PE in 2020, with a target price of 4.27 yuan and maintaining a "buy" rating.
Risk Tips:
The company's push sales fell short of expectations; the company's open market financing channels returned less than expected.