Key points of investment:
Revenue increased significantly year over year. The company's total revenue in 2019 was about 9.095 billion yuan, an increase of 52.9% over the previous year, mainly due to the increase in real estate brokerage network services. Looking at the business segment, first-hand real estate agency service revenue was 4,5566 billion yuan, a year-on-year decrease of 3.9%, mainly due to a decrease in the average commission rate; real estate brokerage network service revenue was 3,551 billion yuan, an increase of 742.5% over the previous year. Mainly because more brokerage companies cooperated with companies to sell new properties, the total value and commission rate of real estate brokerage network services increased; revenue from real estate data and consulting services was 978 million yuan, an increase of 26.4% over the previous year, mainly due to the increase in revenue from evaluation and ranking services and data services. The company's net profit in 2019 was 971 million yuan, down 10.3% from the previous year, the core net profit of the mother was 998 million yuan, down 12.8% from the previous year, and the profit before tax, interest, depreciation and amortization was 1,672 million yuan, up 9.7% year on year. In terms of profit margin, the company's operating profit margin in 2019 was 13.9%, down 9.9 percentage points from the previous year, mainly due to the sharp increase in real estate brokerage network services with low operating profit margins; gross margin was 21.94%, down 13.26 percentage points from the previous year; and the net profit margin was 10.67%, down 7.51 percentage points from the previous year.
Segmented businesses are going hand in hand. ① First-hand housing agency sales service: The total sales area for the full year of 2019 was 43.33 million square meters, an increase of 4.9% over the previous year, and the total sales amount was 532.4 billion yuan. By the end of 2019, the company had signed unsold reserve projects covering an area of 288.1 million square meters, ensuring the steady development of first-hand housing agency business in the future. ② Real estate data and consulting services: The profit for the full year of 2019 was 232 million yuan, an increase of 7.8% over the previous year. In 2019, the company launched products such as CAIC Asset Management Cloud, CAIC Investment Management Cloud, CAIC Database, Leasing System, Grid Land Assessment System, Créray China Real Estate Bond Leading Index, CPA Construction Management Platform, and WishDeco Hardcover Smart Selection Platform. The company expanded from residential data to the non-residential sector, leading industry demand and creating industry value in six areas, including Crory Real Estate, Crory Asset Management, Crory Securities, Crery Property Management, Crory Leasing and Sales, and Crory Industrial Research. ③ Real estate brokerage network service: In 2019, the company vigorously developed a second-hand linkage business and empowered micro, small and medium-sized intermediaries and agents.
The total sales amount for the full year of 2019 was 138.2 billion yuan, an increase of 298.1% over the previous year. The number of units sold was 105,400, an increase of 408.7% over the previous year. Following the single sector turning a loss into a profit in mid-2019, the company made a profit of 57.9 million yuan for the whole year, creating great value for the company in just four years.
The cash flow is steady, and the three major expense controls are effective. The company's bank balance and cash in 2019 was $2,294 million, up 0.62% year on year, and balance ratio was 53.02%, up 20.84 percentage points year on year.
The three major expenses accounted for 10.88% of revenue, a decrease of 0.96 percentage points over the previous year.
Investment advice: “Better than the market”. We expect the company's EPS in 2020 to be $0.67 per share, giving the company 10-12 times its 2020 PE valuation. The corresponding reasonable market value is HK$105-12.6 billion, and the corresponding reasonable value range is HK$7.58-9.09 per share. (Unless otherwise specified in this article, prices are in RMB; 1 HKD = 0.88 RMB)
Risk warning: The pandemic affected sales demand longer than expected, causing the growth rate of agent sales amounts to fall short of expectations.