Revenue and net profit declined by 8.4% to RMB185.0bn and 9.6% to RMB14.1bn in 1H20 respectively due to the impact from COVID-19. Sales suffered from the outbreak but sales pace has improved since Jun 2020. Total saleable resources amounted to RMB1,670bn based on 266mn sq m land bank. We cut TP to HK$13.36, based on 50% discount to NAV. Maintain BUY.
- Core profit tumbled 9% in 1H20. Revenue and net profit declined by 8.4% to RMB185.0bn and 9.6% to RMB14.1bn in 1H20, respectively. Gross margin was dragged down by 2.9ppts to 24.3% as recognized ASP shrank by 9.7% to RMB8,116 per sq m. Core earnings also tumbled by 8.6% to RMB14.6bn in the period. The earnings set back was caused by delayed construction and delivery arisen from COVID-19 and RMB940mn early investment loss of new businesses.
- Expect to turn around in Aug. Attributable contracted sales declined by 5.3% to RMB267bn in 1H20. Due to the outbreak, sell through rate was only 62% in 1H20. CG will launch RMB641.2bn of attributable saleable resources in 2H20. The Company targets to have 67% sell through rate in full year of 2020 while full year sale target is RMB608.5bn. Due to the market recovery, CG achieved contracted sales of RMB54.3bn in Jul. It aims at turnaround for the accumulated contracted sales in Aug.
- 266mn sq m attributable land bank. CG acquired 167 projects with attributable GFA of 23.35mn sq m in 1H20. As at Jun 2020, total attributable land bank amounted to 266mn sq m in 2,662 projects covering 288 mainland cities. These land banks are projected to provide RMB1,670bn saleable resources, of which 17.4%, 34.3% and 48.3% are located in tier 1, tier 2 and tier 3 & 4 cities, respectively.
- Net gearing ratio edged to 58% as at Jun 2020. Cash collection ratio was 94% in the period and cash on hand totaled RMB205.5bn as at Jun 2020. However, net gearing ratio moved from 46.3% as at Dec 2019 to 58.1% as at Jun 2020. We believe its financial position is still healthy as cash/short term debt ratio was 3.0x.
- Maintain BUY. As at Jun 2020, pre-sold and unbooked properties amounted to RMB780bn, of which RMB286bn will be booked by consolidation and RMB140bn by JCE in 2H20. We cut earnings forecast by 11.1% to RMB40.3bn in 2020 and 3.7% to RMB48.4bn in 2021. We adjust end-20 NAV forecast from HK$26.45 to HK$26.72. We also trim TP from HK$14.55 to HK$13.36, based on 50% discount to NAV. Maintain BUY recommendation.
