Revenue and core net profit increased by 53.2% to RMB202.0bn and 23.4% to RMB16.0bn in 1H19, respectively. We raise our earnings forecast by 7.6% to RMB41.1bn in 2019 and 7.9% to RMB45.5bn in 2020. We estimate end-20 NAV to be HK$27.64. As a result, we cut TP from HK$16.49 to HK$15.20. Maintain BUY.
- Interim core profit gained 23% to RMB16.0bn. 53% increase in delivery GFA drove revenue growth by 53.2% to RMB202.0bn in 1H19. GM enlarged from 26.5% in 1H18 to 27.2% in 1H19. Selling expenses rose 102% because of increasing promotion while admin expenses increased 89% due to business expansion. Excluding non-cash items, core earnings increased by 23.4 % to RMB16.0bn in 1H19.
- Contracted sales declined in 1H19 but confident on full year gain. In 1H19, attributable contracted sales amount and area tumbled by 9.3% to RMB282bn and 7.7% to 31.29mn sq m, respectively. Sell-through rate was 65% in 1H19. CG will launch RMB482bn saleable resources in 2H19. It feels confident that 2019 sales will surpass last year sales of RMB502bn. As at Jun 2019, pre-sold and unbooked properties totaled RMB740bn that can secure earnings visibility in 2019 and 2020.
- 2,381 projects in 279 mainland cities. In 1H19, CG acquired 260 projects with 33.02mn sq m attributable GFA for attributable land premium of RMB114.8bn. As at Jun 2019, CG had invested 2,381properties projects in 279 mainland cities with attributable GFA 263.1mn sq m, of which Guangdong accounted for 21%. Total attributable saleable resources amounted to RMB2,784bn, of which RMB347bn are targeted to GBA buyers. In addition, 59.09mn sq m attributable land bank may be converted and injected to the Company in the future.
- 59% net gearing ratio as at Jun 2019. As at Jun 2019, cash on hand and total debt amounted to RMB222.8bn and RMB331.9bn, respectively. Net gearing ratio stood at 58.6%. RMB113.9bn debt will be matured in coming 12 months. CG has ample resources to face the obligation. Cost of debt edged up slightly from 6.11% as at Dec 2018 to 6.13% as at Jun 2019.
- Maintain BUY. We raise our gross margin and delivery pace assumptions. As a result, we adjust upwards our earnings forecast by 7.6% to RMB41.1bn in 2019 and 7.9% to RMB45.5bn in 2020. We also forecast end-20 NAV to be HK$64. As a result, we cut TP from HK$16.49 to HK$15.20, based on 45% discount to NAV.
