Net profit in 2019 of RMB39.6bn was in line with our and market estimates. The Company achieved RMB552.2bn attributable contracted sales in 2019 and expects to have RMB6,07bn target in 2020. Given the leading position, we believe CG will benefit from current turbulent moment. We slightly adjust our earnings forecast and trim TP to HK$14.55. Reiterate BUY recommendation.
- Inline 2019 results. Revenue and net profit surged by 28.2% to RMB485.9bn and 14.2% to RMB39.6bn in 2019, respectively. Driven by 31% surge in delivery GFA, revenue from property development gained by 29% to RMB475bn in 2019. Meanwhile, SG&A expenses were well control with SG&A expenses/revenue ratio narrowed by 0.6ppts to 7.7% in the period. Core profit advanced by 17.6% to RMB40.1bn in 2019, 2.3% below our estimate. Full year dividend grew by 17% to RMB0.5712 per share with 31% payout ratio.
- 10% up of 2020 sales target. Contracted sales amount dropped 28% to RMB53.8bn in 2M20 due to COVID-19 outbreak. CG is confident to have 10% sales growth in 2020, based on RMB906.6bn saleable resources and 67% sell through rate (vs 72% in 2019). As at end-19, pre-sold and unbooked properties amounted to RMB715.8bn with GM estimate of 24%.
- 259mn sq m attributable land bank. CG acquired 398 projects with attributable GFA of 52.72mn sq m in 2019. As at end-19, total attributable land bank amounted to 259mn sq m in 2,512 projects covering 282 mainland cities. These land banks are projected to provide RMB1,702bn saleable resources, of which 17.1%, 36.1% and 46.8% are located in tier 1, tier 2 and tier 3 & 4 cities, respectively.
- Healthy balance sheet. CG maintains its prudent financial policy. Net gearing ratio and cash/short term debt ratio were 46.3% and 2.3x as at end-19, respectively. We believe its financial position is one of the best among the private owned developers. Cost of debt was 6.34% in 2019 and we believe there is room of improvement in the future.
- Maintain BUY. Being the market leader, we believe CG will benefit from this difficult moment. We forecast earnings to grow by 14.6% to RMB45.3bn in 2020 and 10.9% to RMB50.2bn in 2021. We cut end-20 NAV forecast from HK$27.64 to HK$26.45. Accordingly, we trim TP from HK$15.20 to HK$14.55, based on 45% discount to NAV. Maintain BUY recommendation.
