20210209-招银国际-大发地产-06111.HK-Rising_YRD_player_with_high_asset_turnover_3页_814kb

Dafa Properties Group (6111 HK) Summary

Core Content

Dafa Properties Group is a rising player in the YRD (Yangtze River Delta) property sector, with a strong focus on the region. The company has demonstrated significant growth, achieving a compound annual growth rate (CAGR) of over 50% in sales from 2018 to 2020, surpassing RMB30bn in sales. It is expected to continue this growth trajectory with a projected 15-20% sales growth in 2021E, reaching RMB35bn. The firm's strategy emphasizes improving return on equity (ROE) and funding rate through asset turnover optimization, enhanced cash collection, and inventory clearance.

Key Highlights

• YRD Focus: Dafa is deeply rooted in the YRD region, including cities like Wenzhou, Ningbo, Suzhou, and Nanjing. The region's consistent demand supports the company's growth.
• Land Bank and Saleable Resources: The company has a total land bank of 6.5 million square meters and RMB91bn in saleable resources, with 47% attributable to the company.
• Sales Growth: Sales growth remains a key driver, with a projected 15-20% YoY growth in 2021E, outperforming the industry's 10% growth.
• Asset Turnover Strategy: Dafa has a high asset turnover strategy, achieving breakeven within 12 months of land acquisition. This is supported by public bidding for land resources (100% in 2020) and joint ventures with market leaders like Country Garden.
• Funding Rate Improvement: The company's funding rate is at 9.5%, and there is potential to reduce it through debt restructuring, improving cash collection rates, and optimizing cash composition.

Financial Overview

Revenue and Growth

• Revenue (RMB mn): RMB5,946 (FY18A), RMB7,398 (FY19A), RMB9,089 (FY20E), RMB10,205 (FY21E), RMB11,346 (FY22E)
• YoY Growth (%): 30.1%, 24.4%, 22.9%, 12.3%, 11.2%
• Projected Revenue CAGR (2019-2022E): 15%

Net Income and EPS

• Net Income (RMB mn): RMB477 (FY18A), RMB517 (FY19A), RMB556 (FY20E), RMB629 (FY21E), RMB721 (FY22E)
• EPS (RMB): 0.58, 0.62, 0.67, 0.76, 0.87
• Projected Core Earnings CAGR (2019-2022E): 12%

Valuation Metrics

• P/E (x): 10.1, 9.3, 8.6, 7.6, 6.7
• P/B (x): 1.6, 1.4, 1.3, 1.1, 1.0
• Yield (%): 1.3, 1.6, 2.0, 2.8, 3.1
• ROE (%): 15.5, 15.1, 14.6, 14.9, 15.2
• Net Gearing (%): 128.1, 111.0, 105.9, 97.4, 86.8

Target Price and Recommendation

• Target Price (HK$): 8.32
• Upside from Current Price (HK$6.96): +19.5%
• Rating: BUY

Strategic Focus

• Sales Growth: Continued growth in sales is expected due to strong regional demand and a debt advantage after meeting the "three red lines" by end-2020.
• Margin Upside: The company aims to improve margins through asset turnover and expansion into less competitive regions.
• Funding Rate: Improvement in funding rate is a key focus, with the potential to reduce the rate by repaying trust loans and enhancing cash collection.
• Inventory Clearance: Inventory of RMB2.8bn is expected to be cleared to improve financial health.

Key Ratios

• Gross Margin (%): 26.6, 22.9, 22.1, 22.8, 23.5
• Operating Margin (%): 17.9, 14.8, 14.3, 15.1, 15.9
• Net Margin (%): 8.0, 7.0, 6.1, 6.2, 6.4
• Effective Tax Rate (%): 50.5, 36.8, 36.8, 36.4, 36.1
• Current Ratio (x): 1.3, 1.4, 1.5, 1.5, 1.6
• Inventory Day: 1011.8, 813.6, 721.0, 706.1, 691.3
• ROE (%): 15.5, 15.1, 14.6, 14.9, 15.2

Shareholding and Performance

• Shareholding Structure:
  • GE Yiyang: 72.5%
  • Free Float: 27.5%
• Share Performance:
  • 1-mth: 4.5%
  • 3-mth: 1.7%
  • 6-mth: 50.9%
  • 12-mth: 32.1%

Risk and Disclaimer

• Risk: Policy tightening is a key risk factor.
• Disclosure: CMBIS has an investment banking relationship with the issuers covered in the report within the past 12 months.
• Disclaimer: The report is for informational purposes only and does not constitute investment advice. It is not an offer or solicitation to buy/sell securities. CMBIS does not assume responsibility for any reliance on the information in the report.