20210401-招银国际-新力控股集团-02103.HK-Structural_change_in_land_bank_composition_to_support_sustainable_growth_4页

Sinic Holdings (2103 HK) Summary

Core Content

Sinic Holdings has reported in-line results for 2020, with core earnings increasing by 1% YoY. The company's performance is supported by a diversified land bank structure, which includes 33% in GBA, 31% in Jiangxi, 20% in YRD, and 16% in Southwest. This diversification, along with a disciplined land costs/ASP ratio of 32%, is expected to foster sustainable growth. Additionally, the company has made significant improvements to its balance sheet, with a debt to asset ratio of 73.6% in 2020 (down from 76% in 2019), allowing it to reach the green category within 1.5 years.

Main Points

• 2020 Performance:

  • Revenue grew by 4% YoY to RMB28.1bn.
  • Gross profit margin declined to 24.4% from 29.6%.
  • Net margin remained stable at 7.0%.
  • Core net profit increased by 1% YoY to RMB1.868bn.
  • Core earnings rose by 1% YoY to RMB1.9bn.
  • The company maintained a 65.6% sell-through rate, contributing to a target of RMB55bn in attributable sales for 2021E.

• Growth Expectations:

  • Attributable sales are expected to grow by more than 10% YoY, reaching RMB55bn.
  • The attributable sales ratio is projected to improve gradually.
  • Total sales are estimated at RMB114bn, giving Sinic more resources to increase its ownership stakes.
  • Gross profit margin is estimated to stabilize at 24–25%.

• Land Bank Composition:

  • The YRD region has become a top priority, with 43% of 2020 land acquisitions allocated there.
  • The company's land acquisitions are expected to be composed of 20% industrial land, 50% public auction, and 30% M&A.
  • This structure is expected to help maintain the 32% land costs/ASP ratio.

• Balance Sheet:

  • Net gearing improved to 63.6% in 2020 from 67% in 2019.
  • Debt to asset ratio decreased to 73.6% in 2020.
  • The company is on track to reach the green category within 1.5 years.

Key Information

• Earnings Summary:

  • Revenue is projected to grow from RMB28.1bn in 2020 to RMB32.003bn in 2022E.
  • Net profit is expected to increase from RMB2.079bn in 2020 to RMB2.299bn in 2022E.
  • EPS is expected to rise from RMB0.55 in 2020 to RMB0.64 in 2022E.
  • Core EPS is expected to grow from RMB0.52 in 2020 to RMB0.64 in 2022E.

• Stock Performance:

  • The stock has a market cap of HK$14.2bn.
  • The current price is HK$3.98, with a target price of HK$4.95.
  • The stock has a 12-month price performance of -6.8%.

• Shareholding Structure:

  • Zhang Yuanlin holds 79.0% of the shares.
  • Employee Incentive Trust holds 4.2%.
  • Public shareholders hold 16.8%.

• Key Ratios:

  • Gross margin is expected to decline from 27.9% in 2020 to 26.6% in 2022E.
  • EBIT margin is expected to decrease from 18.1% in 2020 to 17.3% in 2022E.
  • Net margin is expected to remain stable at 7.5% in 2021E and 7.2% in 2022E.
  • ROE is expected to decrease from 21.4% in 2020 to 17.5% in 2022E.
  • Net debt to total equity ratio is expected to rise from 68.5% in 2020 to 74.6% in 2022E.

Analyst Recommendation

• Ratings:
  • BUY: The company is trading at 5.3x 2022E P/E, which is slightly below the industrial average of 5.5x.
  • Target Price: HK$4.95 (unchanged from previous TP).
  • Up/Downside: +24.4%.
  • Maintain Buy: The analyst maintains the "BUY" rating, citing the company's potential for growth and improved balance sheet.

Risk and Disclaimer

• The report contains important disclosures and disclaimers, emphasizing that the information is not tailored to individual investors and that there may be conflicts of interest due to the company's investment banking relationships.
• The report is not an offer or solicitation to buy or sell any securities.
• CMBIS is not a registered broker-dealer in the United States and is not subject to U.S. rules regarding the preparation of research reports.
• The report is intended for distribution in the United States solely to "major US institutional investors" and may not be provided to any other person without prior written consent.