20230201-招银国际-中国海外发展-00688.HK-FY22E_preview__page_not_yet_turned_5页_1012kb

COLI (688 HK) Company Update Summary

Core Content Overview

This report provides a comprehensive update on COLI (China Property & Land Development Co., Ltd.), focusing on its financial performance, earnings outlook, and valuation metrics for the fiscal years 2022E, 2023E, and 2024E. The analysis is conducted by CMB International Global Markets (CMBIGM), a subsidiary of China Merchants Bank.

Main Financial Highlights

Earnings Summary (RMB mn)

Earnings Forecast

• 2022E core net profit is expected to decline by 20% YoY to RMB29bn, slightly below the buy-side consensus of RMB2.7.
• 2023E core net profit is forecast to decline by 7% YoY to RMB27.074bn, driven by a 15% YoY sales decline in 2022.
• 2024E is projected to see a 15.6% YoY increase in EPS to RMB2.86, with a 10.6% YoY revenue growth.

Sales and Performance Outlook

Sales Performance

• 2022E sales declined by 15% YoY (excluding COGO), placing COLI in the first category of performance, behind only Yuexiu, CRL, Binjiang, and CM Shekou.
• 2023E sales are expected to turn positive, supported by:
  1. Steady land investments in 2022, with land acquisition/sales at 31%.
  2. Improving sell-through rates due to market reopening and policy relaxation.
• The recovery potential remains uncertain, especially in Tier 1 cities.

Profitability and Margin

• Gross margin is projected to decline to 21% in 2022E from 23% in 2021.
• EBIT margin is expected to decrease to 20.4% in 2022E from 22.6% in 2021.
• Net margin is estimated to fall to 13.3% in 2022E from 16.6% in 2021.

Valuation and Investment Outlook

• Current P/B ratio is at 0.6x, which is below the 5-year historical average of 0.8x.
• Target Price (TP) has been revised down by 8% to HK$27.90 (from HK$30.49), reflecting lower sales bookings and margin pressures.
• Discount to NAV is now 60%, compared to 55% previously.
• Despite the decline in earnings, the attractive valuation and potential sales recovery support the "Buy" rating.
• Catalyst: Policy relaxation in Tier 1 cities.
• Risk: 2022E earnings miss.

Key Ratios

Financial Summary

Income Statement

• Property development remains the main revenue source (96.7% in FY22E).
• Rental income and other income are increasing, contributing to revenue diversification.
• EBIT and pre-tax profit are under pressure due to costs and margin compression.

Cash Flow Summary

• Net cash from operating is expected to turn negative in 2022E and 2023E, reflecting challenging sales.
• Net cash from financing is positive, showing support from capital markets.
• Net change in cash is expected to decline in 2022E but recover in 2023E and 2024E.

Balance Sheet

• Current assets are increasing, with cash at RMB123.699bn in 2022E.
• Current liabilities are also rising, with borrowings increasing to RMB51.313bn.
• Shareholders' equity is growing, with total equity at RMB371.158bn in 2022E.

Analyst Recommendations

• Rating: BUY (maintained).
• Target Price: HK$27.90.
• Up/downside: +31.9% from current price of HK$21.15.
• Reasoning: Foreseeable sales growth and margin recovery in 2023E, along with attractive valuation at 0.6x PB.

Key Takeaways

• COLI is expected to see continued earnings decline in 2022E and 2023E due to sales drop and margin pressure.
• Positive sales growth is anticipated in 2023E, driven by land investments and policy relaxation.
• Valuation remains attractive, with P/B at 0.6x and discount to NAV at 60%.
• The "Buy" rating is maintained, but the report advises waiting for clearer sales signals before buying.
• Risks include 2022E earnings miss and uncertainty in market recovery.

Conclusion

While COLI faces short-term challenges with declining sales and profits, the potential for recovery in 2023E and 2024E is supported by its strong land bank and recovery in the property market. The current valuation is attractive, and the analyst recommends a Buy rating with a target price of HK$27.90, despite the high uncertainty in market conditions. Investors should monitor sales performance and policy developments in Tier 1 cities as key drivers of future performance.