CMB International Securities | Equity Research | Company Update Summary
Core Company Overview: Poly Develop - A (600048 CH)
Poly Develop - A is a Chinese property developer with a strong financial position and a substantial land bank. The company has demonstrated stable financial performance, with revenue and net profit increasing slightly in the first nine months of 2020. The report highlights the company's healthy balance sheet, which supports its long-term growth and provides a solid foundation for future development.
Key Financial Performance (9M20)
- Revenue: RMB117.4bn, up 5.1% year-over-year (YoY).
- Net Profit: RMB13.2bn, up 2.9% YoY.
- Gross Margin: Slightly retreated to 34.0%, still maintaining a high level compared to peers.
- Net Profit Margin: Decreased by 0.2ppts to 11.2%.
- Cost Management: Effective cost control led to a decline in selling expenses by 3.6% and a small increase in administrative expenses by 2.0%.
Contracted Sales Performance
- Contracted Sales Amount: RMB367.4bn, up 5.9% YoY.
- Contracted Sales Area: 24.44mn sq m, up 6.6% YoY.
- Outperformed National Property Sales: While national sales increased by 3.7% in amount and decreased by 1.8% in area, Poly Develop - A saw better performance, indicating strong brand influence and market position.
Land Bank and Development Capacity
- Attributable Land Bank: 211mn sq m, sufficient for the next five years of development.
- New Projects Acquired: 88 projects with a total gross floor area (GFA) of 19.82mn sq m.
- New Starts GFA: 38.39mn sq m in 9M20.
- Under Development GFA: 140.2mn sq m.
- Future Development GFA: 70.8mn sq m.
Financial Strength and Capital Structure
- Net Gearing Ratio: 71% as of 30 Sep 2020, indicating a relatively conservative capital structure.
- Cash/Short-Term Debt: 1.9x, showing strong liquidity.
- Total Liabilities/Total Assets (after contract liabilities): 0.67x, indicating a strong balance sheet and the ability to pass recent capital tests.
- Funding Advantage: As a state-owned enterprise (SOE), Poly Develop - A benefits from lower funding costs and better access to debt financing.
Earnings and Forecast
| Year |
Revenue (RMB mn) |
YoY Growth (%) |
Net Profit (RMB mn) |
YoY Growth (%) |
EPS (RMB) |
YoY Growth (%) |
| FY18A |
194,555 |
32.7 |
18,904 |
20.5 |
1.59 |
20.5 |
| FY19A |
235,981 |
21.3 |
27,959 |
47.8 |
2.35 |
47.8 |
| FY20E |
301,311 |
27.7 |
33,048 |
17.9 |
2.77 |
17.9 |
| FY21E |
347,892 |
15.5 |
38,404 |
16.2 |
3.22 |
16.2 |
| FY22E |
401,678 |
15.5 |
44,616 |
16.2 |
3.74 |
16.2 |
Target Price and Recommendation
- Target Price (TP): RMB22.16, equivalent to 8.0x 2020E P/E.
- Current Price: RMB15.36.
- Up/Downside: +44.3%.
- Recommendation: Maintain BUY.
Peer Group Valuation Comparison
| Company |
Ticker |
Last Price (LC) |
TP (LC) |
2020E P/E |
2021E P/E |
2022E P/E |
NAV/share (LC) |
Discount to NAV (%) |
| Vanke - H |
2202 HK |
24.00 |
33.92 |
6.2 |
5.5 |
4.9 |
48.46 |
50.5 |
| COLI |
688 HK |
19.40 |
30.49 |
4.6 |
4.3 |
4.1 |
43.55 |
55.5 |
| Country Garden |
2007 HK |
9.54 |
13.36 |
4.6 |
4.6 |
3.9 |
26.72 |
64.3 |
| CR Land |
1109 HK |
31.55 |
44.79 |
6.9 |
7.6 |
6.3 |
63.98 |
50.7 |
| Longfor |
960 HK |
42.35 |
34.27 |
12.1 |
11.9 |
9.5 |
48.95 |
13.5 |
| Shimao |
813 HK |
27.35 |
44.94 |
7.4 |
6.6 |
5.6 |
59.92 |
54.4 |
| Logan Property |
3380 HK |
12.12 |
17.43 |
5.4 |
4.6 |
4.0 |
29.05 |
58.3 |
| Agile |
3383 HK |
10.60 |
13.89 |
4.9 |
4.7 |
4.0 |
27.78 |
61.8 |
| Poly Development |
600048 CH |
15.36 |
22.16 |
6.5 |
5.5 |
4.8 |
27.73 |
44.6 |
Stock Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-Month |
-1.9 |
-5.7 |
| 3-Months |
-0.3 |
-2.2 |
| 6-Months |
-4.5 |
-22.7 |
| 12-Months |
7.3 |
-12.1 |
Analysts and Contact
- Analysts: Samson Man, CFA and Bowen Li
- Contact Information:
Key Ratios
| Ratio |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| Gross Margin (%) |
32.5 |
35.0 |
32.9 |
32.8 |
32.8 |
| EBIT Margin (%) |
19.3 |
21.1 |
19.7 |
19.7 |
19.7 |
| Operating Margin (%) |
18.3 |
21.4 |
20.3 |
20.4 |
20.6 |
| Net Margin (%) |
9.7 |
11.8 |
11.0 |
11.0 |
11.1 |
| ROE (%) |
16.4 |
19.9 |
20.4 |
20.6 |
20.7 |
| Net Debt / Total Equity (%) |
80.6 |
56.9 |
60.9 |
55.2 |
52.8 |
| Current Ratio (x) |
1.7 |
1.6 |
1.6 |
1.7 |
1.7 |
CMBIS Ratings
- BUY: Stock with potential return of over 15% over next 12 months.
- HOLD: Stock with potential return of +15% to -10% over next 12 months.
- SELL: Stock with potential loss of over 10% over next 12 months.
- NOT RATED: Stock not rated by CMBIS.
- OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
- MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
- UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.
Important Disclosures
- The report is not an offer or solicitation to buy or sell any securities.
- CMBIS does not provide individually tailored investment advice.
- The information is based on publicly available data and may not be accurate or complete.
- There are risks involved in transacting in any securities.
- The report may contain conflicts of interest due to CMBIS's business relationships with the companies mentioned.
Legal and Regulatory Notes
- The report is subject to the laws and regulations of the jurisdiction in which it is received.
- In the UK, the report is only provided to specific categories of investors.
- In the US, it is only for "major US institutional investors".
- In Singapore, it is distributed by CMBI (Singapore) Pte. Limited and regulated by the Monetary Authority of Singapore.
