20210827-招银国际-弘阳地产-01996.HK-Dual_cores_on_track_to_support_steady_growth_4页_765kb

Summary of Redsun Properties (1996 HK) - CMB International Securities Equity Research

Core Content

Redsun Properties (1996 HK) reported steady first-half of 2021 (1H21) results, with core earnings increasing by 6% YoY to RMB674mn. The company's balance sheet remains stable and within the green category, indicating strong financial health. The company is on track to meet its RMB100bn contracted sales target for 2021, having reached RMB49bn in 1H21, which is 49% of its annual target. Contracted sales area grew to 2.9mn sqm (+35% YoY), with an average selling price of RMB17k/sqm (+16% YoY).

The company's commercial operations saw a 37% YoY increase in rental income, driven by the opening of one mall in 1H21 and two malls in 2H20. With plans to open one asset-light mall in 2H21 and two self-owned malls in 2022 (Anqing and Changzhou, total GFA of 200k sqm), it is expected to maintain a 30% YoY rental growth in 2021/22E.

Key Financial Highlights

• Revenue: RMB13.0bn in 1H21, up 35% YoY.
• Gross Profit: RMB2.73bn in 1H21, up 12% YoY.
• SG&A Expenses: RMB820mn in 1H21, down 5% YoY.
• Net Profit: RMB739mn in 1H21, up 9% YoY.
• Core Profit: RMB674mn in 1H21, up 6% YoY.
• EPS: RMB0.22 in 1H21, up 10% YoY.
• Net Margin: 5.7% in 1H21, down 1.3ppt YoY.
• Core Net Margin: 5.2% in 1H21, down 1.4ppt YoY.
• GPM: 21.1% in 1H21, down 4.2ppt YoY from 25.3% in 1H20.
• Net Gearing: 53.9% in 1H21, up 3.6ppt YoY.
• Current Ratio: 1.4x in 1H21, stable compared to previous years.
• Inventory Days: 1023.3 in 1H21, down from 1773.9 in 1H20.
• ROE: 12.5% in 1H21, up from 11.1% in 1H20.
• ROA: 1.8% in 1H21, up from 2.1% in 1H20.

Financial Projections (FY21E to FY22E)

Valuation Metrics

• Current Price: HK$2.65
• Target Price: HK$3.52
• Upside: +32.8%
• Market Cap (HK$ mn): 8,830
• Avg 3 mths t/o (HK$ mn): 11.49
• 52w High/Low (HK$): 3.04/2.24
• Total Issued Shares (mn): 3,332

Shareholding Structure

• Zeng Huansha: 72.3%
• Free float: 27.7%

Share Performance (12-mth)

Analyst Recommendation

• Rating: BUY (Maintain)
• Target Price: HK$3.52
• Upside: +32.8%

Key Ratios

Main Points

• Redsun Properties (1996 HK) has delivered consistent performance with core earnings up 6% YoY in 1H21.
• The company is on track to achieve RMB100bn in contracted sales for 2021, with a strong sell-through rate of 65% in 1H21.
• Commercial operations are expected to support 30% YoY rental growth in 2021/22E due to mall openings.
• The company's balance sheet remains stable, with a net gearing ratio of 53.9% in 1H21 and a current ratio of 1.4x.
• The P/E ratio is at 3.5x for 2021E, below the 1SD-Below-Average of 3.9x, suggesting undervaluation.
• The company's gross margin is expected to bottom at 20% in the coming year, while net margin remains stable.
• The company has a strong free float of 27.7% and is managed by Zeng Huansha, who holds 72.3% of the shares.
• The stock has shown mixed performance over the past 12 months, with a 14.2% absolute gain in 1 month but a -1.5% gain over 12 months.
• The analyst recommends a BUY rating, citing the company's growth potential and undervaluation.

Conclusion

Redsun Properties (1996 HK) continues to show resilience in its core operations, supported by strong contracted sales and a stable balance sheet. The company is on track to achieve its sales and rental growth targets, with a potential upside of +32.8% to its current price. The analyst recommends maintaining a BUY rating due to the company's undervaluation and growth prospects.