Revenue and core profit gained by 19% YoY to RMB28.2bn and 21% YoY to RMB2.45bn in 1H20, respectively. Given contracted sales amount of RMB60bn in 7M20, hit rate was 46% by Jul. The Company acquired land bank through multi-method. As of Jun 2020, total land bank amounted to 48.74mn sq m (attributable: 78%). We maintain our TP of HK$15.48. Reiterate BUY recommendation.
- Core profit surged 21% YoY in 1H20. Revenue and net profit increased by 19.3% YoY to RMB28.2bn and 6.3% YoY to RMB2.42bn in 1H20, respectively. The rise in revenue was driven by 39% increase of delivery GFA to 2.88mn sq m in the period. Profit margin was stable but effective tax rate expanded by 5.1ppts to 53.6% in 1H20. Excluding FX loss and revaluation gain in investment properties (IP), core earnings soared 21.0% YoY to RMB2.45bn in 1H20.
- 46% hit rate by Jul. Contracted sales amounted to RMB60.4bn in 7M20, up 0.2% YoY. Aoyuan accomplished 46% of full year sales target of RMB132bn by Jul. The Company plans to launch RMB220bn worth of properties for sales in 2020. It will strengthen the sales pace in the Southern China for the rest of the year in order to complete the sale plan. Furthermore, the acquisition 29.3% stake of Kinghand Industrial (000615 CH, NR) will supplement the sales force in Northern China.
- Multi-channel land bank replenishment. Aoyuan acquired 44 property projects with total GFA of 6.95mn sq m (attributable: 76%) in 1H20. As of Jun 2020, total land bank was 48.74mn sq m (attributable: 78%) and spanned 90 mainland and overseas cities. Average land cost is RMB2,727 per sq m. Beside the traditional land bank acquisition method such as auction, Aoyuan obtains land bank by M&A and urban redevelopment projects. In the period, it acquired 29.3% interest of Kinghand Industrial which has projects in Beijing, Tianjin, Chongqing, Chengdu, Nanjing, Guangdong and Hebei, etc. Furthermore, it has participated in over 50 urban redevelopment projects with estimated saleable GFA of 17.59mn sq m, of which 95% are located in GBA.
- Reiterate BUY. As of Jun 2020, pre-sales and unbooked properties totaled RMB180bn that provided a high earning visibility next two years. Net gearing ratio stood at 79.8% while cash/short term debt ratio was 1.5x as of Jun 2020. Financial position was healthy. We slightly adjust our earnings forecast by inclusion of revaluation gain of IP. We forecast net profit to grow by 57% to RMB6.58bn in 2020 and 13% to RMB7.40bn in 2021. We maintain our TP of HK$15.48, based on 50% discount to end-20 NAV of HK$30.95.
