We transfer the coverage of Yuzhou Group and maintain forecast and TP unchanged.We forecast net profit to grow by 25.9% to RMB4.40n in 2020 and 20.3% toRMB5.30bn in 2021. Our TP is HK$4.81, based on 50% discount to NAV. TheCompany built dual headquarters in Shanghai and Shenzhen that will accelerate itsdevelopment in Greater Bay Area. We are optimistic about its long term developmentand expect it to accomplish RMB100 sales target in 2020. Maintain BUY.
Contracted sales grew 50% in 1H20. Yuzhou is doing well in property sales.
Contracted sales amount and area soared by 50.5% to RMB42.9bn and 41.1%to 2.61mn sq m, respectively. It accomplished about 43% of RMB100bnsales target in 2020 by Jun. Yuzhou’s hit rate was better than peers. YangtzeRiver Delta （YRD） region and West Strait Economic Zone were the twolargest contributors and accounted for 62.4% and 19.0% of contracted salesin 1H20, respectively.
Spin-off of property management business is in pipeline. Founded in1997, Yuzhou Property Management ranked 36th on the list of “China Top100 Property Service Providers in 2019” by CIA. In 2019, revenue fromproperty management services amounted to RMB448mn and managed GFAwas 13mn sq m. Following the recent sector rally, Yuzhou plans to spin offits property management business, which will be listed on HKEx this year.
Dual headquarters in Shanghai and Shenzhen. After relocatedheadquarters in Shanghai in 2016, Yuzhou established anotherheadquarters in Nanshan District, Shenzhen in Jun 2020. Since then,Yuzhou started two-wheel-drive strategy that focuses on the businessdevelopment in YRD region and Greater Bay Area. As of Dec 2019, totalland bank amounted to 20.12mn sq m, of which that in Greater Bay Areaonly accounted for 6.2% of total land bank. Currently, Yuzhou hadpenetrated property market in HK, Huizhou, Foshan and Zhongshan. Thereare huge business opportunities for Yuzhou in Greater Bay Area.
Maintain forecast and TP unchanged. Properties pre-sold and unbookedamounted to RMB90bn and gross margin amounted to 26% as of Dec 2019,of which RMB50bn were consolidated. Earnings visibility is high. Weforecast net profit to grow by 25.9% to RMB4.40n in 2020 and 20.3% toRMB5.30bn in 2021. We also estimate end-20 NAV to be HK$9.62. As aresult, our TP is HK$4.81, based on 50% discount to NAV.