Sunshine City (000671): Sales exceed 200 billion yuan to maintain prudent financial end continuous improvement

Sunshine City (000671): Sales exceed 200 billion yuan to maintain prudent financial end continuous improvement
Recent situation of the company We have recently investigated the fundamental situation of the company. Comments on the initial sales exceeded 20 million yuan, 2020 raw materials to achieve double-digit growth.The company has accumulated a total caliber of US $ 211 billion from January to December, an annual increase of 30%, corresponding to an average sales price of 12,694 yuan per square meter, and a sales equity ratio of 66%, which is 11 digits lower than 2018 (77%) (Crere caliber).We expect the company to exceed 220 billion (more than 10% increase) in 2020. At the same time, with the high equity proportion of land acquired this year, construction and market will gradually start to enter, and the proportion of sales equity will also rebound significantly. The estimated growth rate of equity is expected to exceed 20%. Keep the ground prudent, and the proportion of equity has picked up.From January to November, the company added 9.37 million square meters of soil storage, with a total land price of 4.78 million yuan, and the average land price was 4,919 yuan / square meter, accounting for 40% of the current average sales price.The company’s land acquisition amount accounted for 26% of the current period, which is more cautious than 2018 (34%), and the proportion of supplementary land reserve equity rose to 78%, reaching a new high in the past two years (66% / 55% in 2017/2018).80% of the company’s new soil deposits are located in first-tier and second-tier cities and third-tier and fourth-tier cities in the metropolitan area, and 56% of them have been acquired through acquisitions, an increase of 18 percentage points from 2018 (38%).We expect the company to maintain a prudent terrain of trials next year, and may seek more high-quality acquisitions and acquisition opportunities in land acquisition methods. The financial side continues to improve, and financing costs are expected to decrease.In the first three quarters of this year, the company’s net cash flow from operating activities was 11.3 billion, which has been positive since 2017; at the end of the quarter, the company’s cash on hand increased by 17% earlier to 443 trillion, and the short-term loan ratio reached 1.The historical growth rate of 36 times, the net denial rate earlier (221%) down 48 substitutions to 173%.We estimate that with the external net financing of 0, the company’s sales repayment in the second half of 2019 will replace the land consideration and its own volume expenditure, and the cash in hand will increase to 73.4 billion at the end of the year. In the second half of this year, Fitch raised the 重庆耍耍网 company’s long-term foreign currency issuer default rating and senior unsecured bond grades from B, B- to B +, and B respectively. Standard & Poor’s raised the company’s individual credit status assessment from B to B +.We expect that with the continuous improvement of the company’s financial end, more rating agencies will upgrade the company’s credit rating and drive down financing costs. It is recommended to keep the sustainable profit forecast unchanged, and the company is currently trading at 5.4x 2020e price-earnings ratio, significantly lower than the average level of comparable leading A-share real estate companies (6.6 times).Taking into account the company’s solid sales growth, continuous improvement in the financial end and market risk appetite, we raise our target price by 14% to 11.01 yuan, maintain outperform industry rating.The new target price corresponds to 重庆耍耍网 a 7x 2020e price-earnings ratio, implying 29% upside. The progress of risk settlement was less than expected; the improvement of the financial side was less than expected.