2020-04-17 08:05:06 和讯  兴业证券Yan Changming
Company Profile
Poly Real Estate Group specializes in the development and promotion of residential and commercial real estate assets. Besides, the group develops a real estate management activity and proposes real estate services. (Source: Reuters)
On April 15th 2020, Poly Real Estate Group (the company) announced its 2019 annual financial results, stating that its revenue totaled CNY 235.981 billion, a 21.29% increase year-on-year (YoY); its net profit at CNY 37.554 billion, rose by 43.61% from a year earlier; it hit CNY 27.959 billion in net profit attributable to shareholders of the company, a growth of 47.90% from the previous year.
A great increase in performance and improvement in profitability
The company, in 2019, realized revenue of CNY 235.981 billion, a 21.29% YoY increase; its net profit attributable to shareholders grew by 47.9% YoY to CNY 27.959 billion. The company’s gross margin enhanced by 2.48 percentage points to 34.97% and its net profit rate lifted to 15.91% by 2.47 percentage points. The weighted average ROE stood at 21.01%, up 4.38 percentage points from 2018.
Prudent investment, core cities-oriented and sufficient land bank
The company expanded 127 projects in 2019 and spent CNY 155.5 billion in land purchase which accounted for 33.7% of the sales amount.
The amount spent on the business expansion in 38 core cities reached 79%. As of the end of 2019, the company owned construction area of 131.58 million square meters and outstanding area for development of 81.12 million square meters, with 58% in 38 core cities. The sufficient and high-quality project resources laid a solid foundation of its sustainable development.
A great decrease in net debt rate and obvious edges in financing
In 2019, the company’s combined financing costs of liability with interest was 4.95%, showing a competitive edge in financing costs.
With abundant position in financing, the company still had available bank lines of CNY 269 billion.
The net debt rate was 56.91%, down 23.64 percentage points from a year earlier, a lower level in the industry. It also held cash and cash equivalents of CNY 140 billion, 2.1 times the short-term loans and debts due within one year, showing a safe capital structure.
A steady growth in sales and a stable position in the industry
The company realized contract amount of CNY 461.848 billion, a 14.09% annual growth, seizing the fifth spot in the industry and the first among central SOEs and its market share enhanced to 2.89%.
The company received outstanding results in business development in core cities, with 25 cities ranking the top 3 in sales amount, and 38 core cities contributed 77% to the total sales.
A rise in cash bonus
The cash bonus is expected to reach 35% and the dividend rate is expected to be 5.4% (it still needs approval of 2019 annual general meeting of stockholders) based on the share price on April 1st 2020.
Accelerated establishment of real estate ecological development platform
The company is speeding up marketization capability cultivation of its two businesses and has formed a coordinated development landscape of multiple industries including property management, brokerage, business administration, architecture and real estate funds, opening new profit driving engines.
Earnings forecast and investment recommendation
With obvious edges in financing and excellent capability of land purchase, Poly Real Estate Group boasts long-term competitive edges. We are upbeat about its investment value and estimate its EPS to be CNY 2.68/CNY 3.13, implying a P/E ratio to be 5.7x/4.9x, based on the closing price on April 15th 2020. Maintain “Buy”。
Potential risks
great contraction in residents’ leverage including consumption loans and mortgage
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