Xinhualian (000620): 19H1 performance pressured by increased financial costs, Xining project landed and continues to expand cultural and tourism landscape

The company issued 19 interim reports: 1) 19H1: revenue 32.

7.1 billion / + 10.

3%, net profit attributable to mother 1.

06 billion / -19.

1%, mainly due to the increase in management and financial costs.

Deduct non-attributed net profit -0.

35 billion / -127.

42%, net operating cash flow.

9.5 billion / + 2.

3%; 2) 19Q2: Revenue 23.

7.3 billion / + 23.

5%, net profit attributable to mother 0.

98 ppm / + 6.

6%, net of non-attributed net profit 0.

91ppm / -3.

3%, net operating cash flow.

32 ppm / -34.

4%.

The operation of the Tongguan Kiln project has boosted Hunan’s revenue and gross profit, and sales of commercial housing have grown steadily.

① In terms of different industries, the company’s 19H1 commercial housing sales achieved 19 revenue.

7.5 billion / + 9.

7%, gross margin 41.

57% /-0.

98 points; other business revenue 12.

9.5 billion / + 14.

1%, gross profit margin 8.

73% /-2.

2pct.

② In terms of different regions, Beijing has realized revenue3.

53 ppm / +79.

1%, gross margin 25.

77% / + 19.

97 points; revenue of Hunan area 8.

7.2 billion / + 23.

27%, gross margin 27.

55% / + 15.

7pct; Shanghai area revenue 4.

63 ppm / -49.3%, gross margin 44.

45% /-5.

8 points; revenue from overseas areas 3.

8.4 billion / + 489.

9%, gross margin 35.

48% / + 32.

9 points.

The completion of the cultural tourism project led to increased financial costs, and short-term 19H1 performance increased pressure.

1) 19H1: Gross profit margin is 28.

6% /-1.

9pct, period cost rate is 29.

6% / + 4.

2pct, mainly due to rising financial expense ratio.

Among them, the selling expense ratio is 7.

2% /-0.

1pct, overhead cost rate 9.

0% / + 1.

0pct, financial expense ratio 13.

4% / + 3.

3pct, mainly due to the completion and delivery of cultural tourism projects, 19H1 net interest rate 3.

3% /-1.

2pct.
2) 19Q2: The company’s gross profit margin is 31.

7% /-1.

4pct, the overall period cost rate is 25.

3% / + 1.

5pct.

Among them, the sales expense ratio is 6.

8% / + 0.

31pct, management expense ratio 7.

2% /-0.

1pct, financial expense ratio 11.

3% / + 1.

3 points.

The cultural tourism industry is the focus of the company’s future development. The completion of the Xining Children’s Dream Park project continues to promote the expansion of the cultural tourism sector.

① Tongguanyao Ancient Town: Grand opening in August 2018, covering 5D theaters, museums, performing arts centers, hotels, inns, and other large-scale cultural tourism projects. It is a nationally preferred tourism project and a key project in Hunan Province.

The three major cultural and tourism products of the second phase have been launched in 19H1; ② The ancient town of Jiuzi has been fully opened at the end of 18 years, and the completion and delivery of the west bank have been completed.Q3 achieved the overall opening of the park; ③ Zhongzhong Ancient City: The company successfully acquired in 2018, and officially opened in early 19, ending 19H1 passenger traffic and revenue growth; ④ Xining Tongmeng Paradise: Fully launched interior and exterior installation in 18 years and 8Opened in January.

⑤ The Fairview Villa in South Korea: Approved and approved by the local council in the report merger, and has obtained the “Development Permit for the Xinhualian Fairview Village Tourism Park Project” of Jeju Special Self-Governing Province in March 2019.

⑥ Beiwai Xining International Middle School & Changsha Beiwai Yali International Middle School: The company tests the water education industry in order to realize the linkage of education, culture, tourism and other industries.

The real estate business in 19H1 has not yet obtained land due to a macro breakthrough, and will continue to serve as the company’s performance and cash flow support during the cultural and tourism conversion.In the first half of 2019, affected by the macroeconomic environment of the national macro-control policy, the company adopted regional prudent measures. During the period, it did not add any new land reserves and realized the resumed work area of 298.

50,000 square meters, 80 completed and delivered.

40,000 square meters.

The company achieved 西安耍耍网 contracted sales area of 22.

820,000 square meters, sales amount 29.

5 billion with a settlement area of 15.

740,000 square meters, with a settlement amount of 19.

7.5 billion yuan.

Taking into account the transition period of the cultural tourism project, we believe that the company’s real estate business will still provide the company with documentary performance and cash flow support in the future to achieve a stable transformation of cultural tourism.

Investment advice: Buy-A investment rating.

The company’s existing cultural and tourism projects in Jiuzi Ancient Town and Changsha Tongguan Kiln have gradually matured. Langzhong Ancient City, Xining Tourism City, and South Korea’s Jinxiu Mountain have steadily advanced. The “cultural and tourism + finance” business is expected to enter a continuous harvest period.

It is expected that the company’s net profit attributable to its mother for 2019-2021 will be 13.

7 ppm / 15.

8 ppm / 17.

90,000 yuan, EPS is 0.

72/0.

83/0.

94 yuan, PE is 6.

6x / 5.

7x / 5.

0x, given a 6-month target price of 5.

50 RMB.

Risk reminders: competition in the real estate market and policy uncertainty, large expenditures on cultural and tourism projects, long development cycles, less-than-expected climbing, and macroeconomic risks.