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Guosen Securities: Kaisa's Net Profit Grew Significantly, Upgraded the Rating to
Release Time:2019-09-06 | Source:Kaisa Group

On August 29th, Guosen Securities published a research report stating that Kaisa Group (1638. HK) has shown a significant growth in revenue. Thanks to the policy of building Shenzhen into the Pilot Demonstration Area of Socialism with Chinese Characteristics. Kaisa, with abundant land resources in the Greater Bay Area, especially in Shenzhen, will be very likely to benefit from the policy in the future. The "Real Estate Development + Urban Renewal" model empowers the company to keep both the sustainability as well as the profitablity, and the estimated EPS of 2019 and 2020 will be 0.55 and 0.66 yuan respectively, with the corresponding PE 4.5 and 3.8x. After comprehensive consideration, Guosen Securities upgraded the rating of Kaisa Group to "buy". 


The Sales and Profits Both Increased; Abundant Land Reserves in the Greater Bay Area

The research report points out that in the first half of 2019, Kaisa Group obtained 20.11 billion yuan in revenue, increased by 33.8% comparing with that of last year. The net profit attributable to the parent company was 2.84 billion yuan, increased by 66.5% year on year; the core net profit attributable to the parent company was 2.75 billion yuan, increased by 55% year on year; The contracted sales area is about 1.96 million square meters, a year-on-year increase of 38.5%; the contracted sales amount is about 34.7 billion yuan, a year-on-year increase of 37%, 40% of the annual sales target has been achieved; the average sales price is about 17,686 yuan / square meter. 

In the first half of 2019, the company added 2.46 million square meters of equity land reserves, with an average land cost of about 6,600 yuan / square meter, and the equity land acquisition area / total sales area of 1.3; calculated by the equity construction area, the proportion of Dawan District, Yangtze River Delta and central China reached 60%, 19% and 13%, respectively. By the end of the first half of 2019, the company had a total land reserve of about 25.8 million square meters, accounting for 76% of the first-line and key second-line cities; among them, Dawan district had a land reserve of more than 14 million square meters, while Shenzhen accounted for 35% of Dawan district. In addition, the company has an area of about 32 million square meters of old reform reserves, all of which are located in Dawan District, and plans to supply 800000-1 million square meters of land reserves every year; the company's abundant land reservation will effectively ensure the development in the future.

In the first half of 2019, the gross profit margin of the company was 33.4%, 1.8 percentage points higher than that of the same period last year. By the end of the first half of 2019, the company's asset liability ratio after excluding the advance receipts is 65%, 2% lower than that of the end of 2019; the net liability ratio is 191%, 45% lower than that of the end of 2018; the Monetary Fund / (short-term loans + non current liabilities due within one year) is 1.3 times, and the short-term solvency is acceptable .


The strength of the old reform highlights the optimization of debt structure and wins the international credit rating of "stable outlook"

In the first half of 2019, the gross profit margin of the company was 33.4%, 1.8% higher than that of the same period last year. By the end of the first half of 2019, the company's asset liability ratio excluding the advance receipts is 65%, which went down 2% compared with the end of 2019; the net liability ratio is 191%, which went down 45% compared with the end of 2018; the Monetary Fund / (short-term loan + non current liabilities due within one year) is 1.3 times, and the short-term debt paying ability is acceptable.

Guoxin Securities research report pointed out that in the first half of 2019, the company successfully transformed the Chengzhong Village Reconstruction Project in Xuhang Town, Jiading District, which has the largest floor area so far in Shanghai. The total floor area is about 127000 square meters, and the planned construction area is 213500 square meters, providing a solid foundation for the company's deep cultivation in the Yangtze River Delta area. In May 2019, the company won the credit rating of three major international rating agencies for the first time: Moody's, standard & Poor's and Fitch respectively rated the issuers of company B1, B and B, with stable outlook; international credit rating will help the company broaden financing channels and further improve the liquidity of bond trading.

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