Zhongnan Construction (000961): 1H19 results expected to increase sales by more than 40%, land acquisition continued to expand

Zhongnan Construction (000961): 1H19 results expected to increase sales by more than 40%, land acquisition continued to expand

Predicted profit growth of 41% per year We expect Zhongnan Construction’s net profit to increase to 41% per year in 1H19.

Focus points 1H19 performance increased by more than 40%, margins improved margins.

We expect that the company ‘s net profit growth in the first half of the year will reach 41%, exceeding the average level of A-share real estate companies we cover (19%); it is expected that with the centralized settlement of projects in the second half (especially the fourth quarter), profit growthIt will be further expanded, and the long-term profit growth rate will exceed 80% (implied 115% earnings growth rate in the second half of the year).

We expect the company’s settlement gross margin ratio to increase marginally 杭州夜网 in the same period last year (19%).

Sales continued to grow, with an initial budget expected to reach $ 200 billion.

In the first half of the year, the company’s contract budget / sale area was 81.2 billion / 646 million square meters, and the quarterly growth rate was converted by 24%. We expect the company’s size to reach 200 billion yuan, supported by a saleable value exceeding 3000 trillion, which is higher thanSpeed 36% (implied sales growth rate of 46% in the second half of the year).

In the first half of the year, the structure of land acquisition tilted to the first and second lines, driving the cost of land acquisition gradually, and continued to grow strongly.

In the first half of the year, the company added 4.39 million square meters of land reserves in cities such as Nantong, Zhenjiang, and Hangzhou, of which first- and second-tier cities accounted for 38%, an increase of 20 percentage points from the same period last year (about 26% in 2018), and average floor prices decreasedIncreased by 18% to 7085 yuan / square meter, accounting for 56% of the current average sales price of 12,568 yuan / square meter.

We expect that with the decline of the land market temperature in the second half of the year, the company’s land acquisition will continue to accelerate, and the land acquisition expenditure is gradually expected to exceed 50 billion, and the proportion of first-tier and second-tier cities will increase from last year.

The financing channels are unblocked and the net debt ratio is expected to decline slightly.

Year to date the company issued a coupon rate of 7.

8% of private placement debt financing.

800 million, and successfully issued overseas credit bonds for the first time to 10.
.

A total of 500 million US dollars was raised by issuing 3 US dollar bonds with a coupon rate of 875%.

We expect that with the company’s expansion of land acquisition, the interest rate denies that the scale will rise, but considering that the release of profits will continue to increase net assets, the company’s net debt ratio is expected to continue a slight downward trend in the first quarter.

Estimates and recommendations The company is currently trading at 7.

9/4.

6x 2019 / 2020e PE ratio, maintain outperform industry rating and target price of 11.

24 yuan, the target price corresponds to 10.

3/6.

0x 2019 / 2020e target price-earnings ratio and 30% upside.

Risks Uncertainty in the external environment has increased; policies in the real estate industry have tightened more than expected.