20181224-兴证国际证券-龙湖集团-00960.HK-Steady_Contracted_Sales,_Deepen_Land_Bank_Layout_4页_736kb

Longfor Group (960.HK) Summary

Core Content

Longfor Group (960.HK) is a leading property developer in China, with a focus on residential and commercial property development. The company has demonstrated consistent growth in sales and land reserves, maintaining a strong position in the industry. In November 2018, the company achieved contracted sales of 18.05 billion RMB (yoy +124.8%) and GFA of 1.14 million sqm (yoy +88.3%). By the end of November 2018, the total contracted sales reached 182.17 billion RMB (yoy +22.7%) and GFA sold amounted to 11.31 million sqm (yoy +16.2%).

The company actively expanded its land bank throughout 2018, acquiring 79 new land parcels from January to November, with aggregate GFA of 18.09 million sqm and attributable GFA of 12.85 million sqm. The total land bank as of the end of 2018 stood at 61.36 million sqm, a 12% increase from the year-end 2017. The average cost of new land was 5936 RMB/sqm, a 7.9% decrease compared to the previous year.

Main Points

• Sales Growth: Longfor Group maintained a steady sales growth, with contracted sales and GFA both showing year-on-year increases.
• Land Reserve Expansion: The company continued to deepen its land bank layout, acquiring significant land parcels and expanding its urban coverage.
• Commercial Projects: A notable portion of the new land acquisitions was used for commercial development, including Paradise Walks in multiple cities.
• Financial Health: The company's financial position is stable, with a growing asset base and a reasonable debt-to-equity ratio.
• Investment Rating: The company is rated "Outperform", with a target price (TP) of HK$28, based on its strong performance and growth trajectory.

Key Financial Information

Market Data (2018.12.21)

Risk Factors

• Macroeconomic Slowdown
• Industry Restriction Policies
• Liquidity Tightening
• Unsatisfactory Sales Performance by Competitors
• RMB Depreciation

Analyst Comments

The company has maintained a steady sales growth and deepened its land bank layout, with a focus on core cities and commercial projects. The Paradise Walks brand has been a key component of its commercial development, with new projects launched in major cities like Hangzhou, Qingdao, Chongqing, Wuhan, Kunming, Guiyang, Suzhou, and Shanghai. The company's core EPS is expected to grow from 1.7 HKD in 2017A to 3.0 HKD in 2020E, reflecting its strong financial performance and strategic positioning.

The target price (TP) of HK$28 is based on a 12x and 10x P/E for 2018E and 2019E, respectively, with a 24% upside from the closing price on December 21, 2018. The analysts maintain the "Outperform" rating due to the company's balanced growth across different business segments and its diversified property investment portfolio.

Related Reports

• <Balance Development of Four Core Business> 20180823
• <Contract Sales Keep Scale, Land Reserve Expand Steady> 20180725
• <Steady Happiness> 20180326
• <Rapid Sales Growth, Increased Holdings Show Confidence> 20171113
• <Business Flowers All Round, Accelerating to Start-up> 20170820
• <Entering HK&SZ, Improving urban Distribution, Tamping the 100 Billion Foundation> 20170516

Investment Rating

• Industry Investment Rating: The industry is expected to perform about the same as the market.
• Company Investment Rating: The company is rated "Outperform", indicating a 5% to 15% better performance than the market over the next 12 months.

Disclaimer and Legal Notes

• The report is prepared by a qualified securities investment consulting business.
• The report is distributed in Hong Kong by China Industrial Securities International Brokerage Ltd., regulated by the Hong Kong Securities and Futures Commission.
• The report may contain hyperlinks to external websites, which are provided for convenience and reference only.
• The Company is not responsible for the content of external websites.
• The Company reserves all copyrights and rights related to the report.
• Unauthorized use or distribution of the report is prohibited without prior consent.