The company has gradually entered the stage of improving quality and efficiency, the financial indicators have been continuously improved, and the debt structure has also been continuously optimized. We are optimistic about the marginal improvement of the company and the rebound in future performance growth. We predict that the core EPS per share in 2020 will be 0.58 Universe 0.66 / 0.81 in 2022, giving the company 8 times PE in 2020, corresponding to the target market capitalization of 20.5 billion yuan, with a target price of HK $5.35, covering the company for the first time and giving the company a "buy" investment rating.
The scale increases rapidly, and the future performance growth has the foundation. In 2019, the company's operating income exceeded 32.5 billion yuan, an increase of 23.1% over the same period last year, and its core net profit reached 2.312 billion yuan, an increase of 20.4% over the same period last year. The contract sales reached 130.7 billion yuan, an increase of 21.02% over the same period last year, and the three-year CAGR reached 36.5%. We estimate that the outstanding amount sold by the company is more than 140 billion, and there is a basis for future performance growth.
The proportion of land rights and interests has increased significantly, and the existing advantageous areas continue to be ploughed. In 2019, the company took 5.6 million square meters of land, and the equity ratio rose from 33% to 73%. In the first half of 2020, the new construction area reached 3.02 million square meters, 52% in the Yangtze River Delta region and 26% in the Hercynian region. The company continues to expand its existing advantages to carry out regional deep ploughing, and the share of rights and interests is maintained at a high level of more than 70%. This reflects that while maintaining the stable growth of the existing scale, the company will gradually put quality improvement and efficiency on the agenda, and it is expected that the share of sales rights and interests will rise accordingly in the future, and the flexibility of performance growth will be further released.
Positioning "improvement master", the product line is clear. The company is committed to the development of high-quality residential properties, and gradually build three benchmark product brands: "Zhengrong House", "Zhengrong Zique platform" and "Zhengrong Yunlu". Its standardization and hardcover project replication rate is up to 100%. Thanks to this, the company can achieve faster product positioning and faster project turnover, so as to better control costs and ensure capital security.
Financial indicators have been continuously improved and debt structure has been continuously optimized. The company maintains good financial discipline, flexibly applies financing channels at home and abroad, and continues to optimize the debt structure. The financial indicators of continuous improvement have been recognized by the capital markets, and the company's comprehensive financing costs have dropped to 7% for three consecutive reporting periods. The company began to take the initiative to deleverage two years ago. at present, the net debt ratio is 71.4% and the cash interest-bearing liability ratio is 209%, all of which are within the red line; excluding accounts received in advance, the asset-liability ratio is 77.2%, which is not up to standard. it is expected that with the gradual increase in the proportion of equity and settlement in the future, the settlement scale will also be able to meet the regulatory requirements more quickly.
Risk tips: sales are not as expected; equity ratio, payback rate can not be effectively improved; due to price limits and other reasons, the risk of decline in profitability.
Valuation and investment rating. The company has gradually entered the stage of improving quality and efficiency, the financial indicators have been continuously improved, and the debt structure has also been continuously optimized. We are optimistic about the marginal improvement of the company and the rebound in future performance growth, giving the company a core net profit forecast of $28,993.524 million in 2022, with a core EPS of 0.580.66 pound per share. With reference to the comparable company's valuation, the company is given 8 times PE in 2020, corresponding to the target market value of 20.5 billion yuan, the target price of HK $5.35, and the estimated NAV of 9.28 yuan per share, covering the company for the first time and giving the company a "buy" investment rating.