Sunshine City (000671): Xiangyang grows its way
Investment highlights for the first time covered Sunshine City Company (000671) with an Outperform Industry rating with a target price of 8.98 yuan, a 40% discount from the 2019 NAV forecast, corresponding to 8 respectively.9, 5.9, 3.9 times 2019?The forecast price-earnings ratio in 2021 implies 37% upside.The reason is as follows: sitting on high-quality resources in core areas.The scale of the company’s unsold soil reserves is 4396 Universal (as of the end of the first half of 2019), which corresponds to a saleable value of US $ 546.7 billion, of which 72% are located in core first- and second-tier cities.The company’s stock of land and storage costs is only equivalent to 34% of the average selling price, which is at a low level in the industry. High turnover, strong incentives and marginal increase in profitability.The company has achieved high-speed growth by creating mainstream products for the masses, supplemented by a multi-level, widely-covered employee incentive system.At present, the company takes an average of 6-8 months to get the land to open (second only to Country Garden, known for its high turnover), and the turnover rate is at a relatively high level in the industry.We believe that the company’s period expenses and financing interest rates have entered a downward channel, and will continue to increase profit margins in the future. The financial side continues to improve.At the end of the first half of 2019, the company’s net interest rate decreased by 174% from 221% at the beginning of the year, and the rejected channel structure and term structure showed an improvement trend, and operating cash flow maintained a positive growth.We estimate that with the external net financing of 0 and the cash remaining unchanged, the company’s sales restructuring and budget expenditure in the second half of 2019 can still support about 54 billion land acquisition expenses, accounting for the estimated sales in the second half of the year.49% of the cash flow is safe. What makes us different from the market?We think the company’s earnings release rate and leverage decline will exceed market expectations next year. Potential catalysts: faster-than-expected earnings release; better-than-expected financial improvement; and China Mintou’s equity reduction has steadily landed. Profit forecast and estimationThe EPS in 2021 will be 1.00 yuan, 1.51 yuan, 2.29 yuan, CAGR is 51%.The company’s current consensus corresponds to 6.5, 4.3, 2.9 times 2019?Forecasted 深圳丝袜会所 P / E ratio in 2021 and 56% NAV discount forecast by 2019. Risk budget policies have been further tightened; the financing environment has been tightened beyond expectations; project carry-over speed and settlement profit margins are expected; cash repayment expenditures have been reduced; stock pledge risks; and the progress of China Minzhu’s reduction in holdings has fallen short of expectations