20180307-兴业金融证券-融创中国-01918.HK-Upgrade_To_Neutral_On_Improved_Earnings_Outlook_13页_460kb
报告摘要
Summary of Sunac China Holdings Analysis
Core Content and Main Points
Sunac China Holdings (1918 HK) has been upgraded to Neutral from Sell, based on improved earnings outlook. The company reported a positive profit alert for FY17, with expected increases in net profit (before exceptional items), revenue, and gross margin percentage (GPM) significantly exceeding initial expectations. These results are attributed to a rapid pickup in revenue bookings from presales proceeds and margins recovery.
Despite the positive earnings growth, several risks remain that prevent a more optimistic rating. These include Sunac's sector-high gearing, worrisome investment in Leshi, and potential equity funding risks. The company's net debt-to-equity ratio is expected to remain high at 162.6-241.9% for FY17F-19F, which is notably higher than the sector average of 61.2-78.9%. This makes Sunac particularly vulnerable to liquidity risks during the onshore deleveraging trend.
The company's earnings growth is expected to be significant in FY18-19, with recurring earnings projected to rise by 198.1% and 82.1% YoY, respectively. However, this growth is primarily a catch-up from previous years' underperformance.
The target price has been revised to HKD27.90, which is a 25% discount to the new end-FY18F ENAV of HKD37.30. This reflects a more conservative valuation due to the ongoing risks.
Key Financial Forecasts
| Metric | Dec-15 | Dec-16 | Dec-17F | Dec-18F | Dec-19F |
|---|---|---|---|---|---|
| Total Turnover (CNYm) | 23,011 | 35,343 | 63,369 | 122,411 | 179,085 |
| Recurring Net Profit (CNYm) | 3,377 | 2,373 | 3,972 | 11,840 | 21,563 |
| Recurring EPS (CNY) | 0.99 | 0.68 | 0.90 | 2.69 | 4.85 |
| DPS (CNY) | 0.19 | 0.26 | 0.27 | 0.81 | 1.46 |
| Recurring P/E (x) | 24.0 | 35.0 | 26.5 | 8.9 | 4.9 |
| P/B (x) | 4.27 | 3.56 | 2.76 | 2.16 | 1.59 |
| Dividend Yield (%) | 0.8 | 1.1 | 1.1 | 3.4 | 6.1 |
| Return on Average Equity (%) | 18.7 | 11.7 | 19.4 | 27.3 | 37.3 |
| Return on Average Assets (%) | 2.9 | 1.2 | 1.5 | 2.1 | 3.2 |
| Net Debt to Equity (%) | 75.9 | 208.2 | 241.9 | 201.6 | 162.6 |
| Our vs Consensus EPS (%) | - | - | -37.7 | -21.0 | -8.7 |
Key Drivers and Risks
Drivers
- Aggressive contacted sales growth: This is expected to significantly boost revenue and earnings.
- Rapid revenue growth: Estimated at 80% YoY for FY17, which is higher than previous estimates.
- Improved GPM: Expected to rise to 20.7% for FY17, surpassing the previous estimate of 19.7%.
Risks
- High gearing: Sector-leading leverage increases vulnerability to liquidity issues.
- Investment in Leshi: A significant portion of Sunac's investments are in the Leshi group, which may pose financial challenges.
- Equity funding risk: Potential need for equity funding may impact short-term share performance.
Share Performance
- Current Price: HKD29.60
- Market Cap: USD16,600m
- 52-Week Price Range: HKD8.09 - HKD41.9
- Average Daily Turnover: HKD1,112m / USD143m
- Free Float: 49%
- Shares Outstanding: 4,400m
- Estimated Return: -6%
- Shareholder Distribution: Sun Hongbin holds 50.7%
Earnings Growth Analysis
- FY17F recurring net profit growth: 67.4% YoY to CNY4bn
- FY18F recurring net profit growth: 198.1% YoY
- FY19F recurring net profit growth: 82.1% YoY
- Earnings growth is mainly catching up from previous years' laggard performance.
Valuation and Recommendation
- Valuation Basis: A 25% discount to the end-FY18F ENAV of HKD37.30
- Target Price: HKD27.90
- Recommendation: Neutral due to the risks associated with high gearing, investment in Leshi, and potential equity funding.
Peer Comparison
| Company | Stock Code | Price (HKD) | Mkt Cap (USDm) | 3-Mth Avg T/O (USDm) | RHB/Cons (USDm) | Discount (%) | P/E (FY17F) | P/E (FY18F) | EPS YoY Change (FY17F) | EPS YoY Change (FY18F) | 3-Yr EPS CAGR | P/BV (FY17F) | P/BV (FY18F) | Dividend Yield | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Large Peer Average | - | - | - | - | - | - | 22.7 | 10.8 | 8.1 | 50.4 | 33.9 | 2.2 | 1.8 | 3.0 | |
| Evergrande | 3333 HK | 22.65 | 38,091 | 71.7 | 43.50 | 47.9 | 12.1 | 7.7 | 6.2 | 10.1 | 56.5 | 2.6 | 2.0 | 3.0 | |
| China Overseas | 688 HK | 27.60 | 38,604 | 89.0 | 35.70 | 22.7 | 9.0 | 8.4 | 7.2 | 9.2 | 7.1 | 1.2 | 1.1 | 3.6 | |
| Country Garden | 2007 HK | 14.30 | 39,688 | 150.9 | 23.00 | 37.8 | 21.3 | 12.8 | 8.9 | 11.5 | 66.5 | 2.9 | 2.3 | 2.6 | |
| CR Land | 1109 HK | 27.80 | 24,598 | 69.9 | 36.70 | 24.3 | 11.8 | 10.3 | 8.6 | 15.3 | 20.1 | 1.5 | 1.3 | 2.8 | |
| Longfor | 960 HK | 22.90 | 17,294 | 19.2 | 30.70 | 25.4 | 13.9 | 11.2 | 8.9 | 16.5 | 24.2 | 1.6 | 1.4 | 3.2 | |
| Sunac | 1918 HK | 29.55 | 16,597 | 153.8 | 37.30 | 20.8 | 57.2 | 16.5 | 7.0 | 8.2 | 246.1 | 3.4 | 2.2 | 1.8 | |
| Mid-and-Small Peer Average | - | - | - | - | - | - | 32.1 | 11.1 | 9.1 | 60.1 | 19.9 | 1.0 | 0.8 | 5.2 |
Conclusion
Sunac China Holdings is experiencing a significant turnaround in earnings, with improved financial performance and increased revenue growth. However, the company's high leverage and investment in Leshi remain a concern, affecting its overall valuation and share price. The recommendation has been upgraded to Neutral, and the target price is set at HKD27.90, reflecting a cautious outlook.
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