Main points of investment
The performance maintained steady growth and the gross profit margin remained high. In 2018, the income was 4.52 billion (+ 52.2%), and the net profit of shareholders belonging to listed companies was 1.24 billion (+ 19.5%). Since the controlling shareholder injected real estate resources into listed companies in 2015, the performance has maintained a steady growth trend, with income growing at a compound annual rate of 55.1% and net profit at a compound annual rate of 43.6%. The company's comprehensive gross profit margin reached 59.5% in 2018 and has remained at a high gross profit margin of more than 50% since 2015.
Upgrade the development strategy and create a new city of wisdom. As a characteristic developer focusing on the field of urban renewal, the company has been practicing the "dual-core strategy" (core urban core area) for project layout. lock in low-cost land resources through two-way expansion of urban renewal and a small number of market bids. In 2018, the company signed a strategic cooperation agreement with Huawei Technology Co., Ltd. to introduce scientific and technological elements into real estate projects and upgrade the strategy to "building a smart urban benchmark", which will help to further enhance the company's added value in the core projects. improve the company's brand recognition as a characteristic developer.
Focus on the core area of the Great Bay area, rich in land storage resources. By the end of 2018, the company had a land reserve of about 5.1 million square meters, of which more than 90% were located in the Greater Bay area, with emphasis on Shenzhen, Hong Kong, Guangzhou, Zhuhai and Dongguan. In addition, the controlling shareholders have controlled land reserves of up to 1210 million square meters, including the Baishizhou project in Shenzhen, the Nanxi project in Zhuhai, the Zhangmu project in Dongguan and the Nansha project in Guangzhou, all of which are located at the core of Guangdong-Hong Kong-Macau Greater Bay Area. The controlling shareholder has provided a letter of intent to the company to ensure that the project will be injected into the listed company after certain conditions are met. This land acquisition model has obvious advantages: (1) the company does not need to backlog a large amount of funds in order to obtain land reserves, it can reduce the financial cost and cash flow pressure; (2) it can avoid the uncertainty risk in the early stage of the urban renewal project; (3) it has the cost advantage over bidding land, which can increase the gross profit margin of the project.
Sustained income has risen steadily, and financing costs have decreased slightly. The company currently has 23 investment properties with a construction area of about 558,000 square meters, and the rental income of commercial properties has increased steadily in recent years, reaching 850 million in 2018. With the delivery of Hong Kong Green View NEO and Shenzhen Mangrove Bay No.1 Zoo Center, sustainable income will increase significantly. By the end of 2018, the company had a cash balance of 7.59 billion, a year-on-year increase of 24.6%. The comprehensive financing cost of the company in 2018 was 6.2%, which was 0.4% lower than in 2017.
Profit forecast and rating. It is estimated that the EPS of the company from 2019 to 2021 is 0.32,0.38,0.47 yuan respectively, and the corresponding dynamic PE is 7.4,6.2,5.0times, respectively. As the king of the old reform in Shenzhen, the company will continue to benefit the city to update the upward trend and shareholders' high-quality resources, and will be able to enjoy a certain valuation premium. At the same time, we take into account that the Baishizhou project is moving forward as scheduled, but the injection into listed companies is still uncertain, covering for the first time, giving 2019 8.5 times valuation, "overweight" rating, equivalent to a target price of HK $3.10.