According to the company's annual report for 2020 and the quarterly report for 2021, the company realized operating income of 455.75 billion yuan in 2020, an increase of 6.5% over the same period last year, and a net profit of 15 billion yuan, an increase of 1.7% over the same period last year. In the first quarter of 2021, the company achieved a total operating income of 132.59 billion yuan, an increase of 66.6% over the same period last year, and a net profit of 3.93 billion yuan, an increase of 7.4% over the same period last year.
Performance is growing steadily and profitability is declining. The main reasons why the growth rate of the company's return net profit in 2020 is lower than the revenue growth rate is as follows: 1. The gross profit margin of the real estate business decreased, falling 1.2 percentage points to 26.4% compared with the same period last year. 2, the investment income dropped significantly, from 8.86 billion in 2019 to 4.77 billion yuan in 2020; 3, the ability of cost control decreased, and the rate of sales management expenses increased by 0.5% to 5.5% compared with the same period last year.
Sales decreased slightly, but the quality of rebate was improved, and the structure of land acquisition was optimized. In 2020, the company realized sales of 358.35 billion yuan, down 7.7% from the same period last year. In the first quarter of 2021, the company achieved sales of 70.209 billion yuan, an increase of 39.0% over the same period last year. A rebate of 308.9 billion yuan was achieved in 2020, with an overall payback rate of 86%, an increase of 8.4% over 2019. The rebate reached 67.1 billion yuan in the first quarter of 2021, and the overall payback rate further increased to 96%. In 2020, the company added 29.32 million square meters of equity capacity construction area, and about 70 per cent of the projects in terms of goods value are located in first-and second-tier cities, up from 40-50 per cent in 2018-2019.
The "three-year and three-step deleveraging" plan has achieved remarkable results. In 2020, the company's net debt ratio improved significantly, falling 21 percentage points to 135.1%; the total interest-bearing debt decreased by about 45 billion yuan from the year's high; at the same time, the cash-to-short-debt ratio rose rapidly during the year, rising 28% year-on-year to 0.97. By the end of the first quarter of 2021, the company's "three-year three-step deleveraging" plan reached the target in advance, and the cash-to-short-debt ratio reached 1.3. The company's comprehensive financing costs rose slightly by 4 BP to 5.64% in 2020, but are still at a low level in the industry.
Raise the profit forecast and target price, and maintain the overweight rating. We adjust the company's EPS to $1.32 for 2021-2023 ($1.21 for 2021-2022). Considering the company's average PE valuation of 6X in 2021, we give the company a valuation level of 6X in 2021, corresponding to the target price of $7.92 (the original target price is $7.26).
Risk hint: the company's sales are not up to expectations; the coordinated development of diversified industries is not as expected.