Modern Land (China) Co., Ltd. (Modern Land, 1107.HK) is a real estate company focusing on the development of large and comfortable communities, and is involved in the research, development and construction of comfortable and energy-saving residential products. The Company has adopted a series of core technical systems to save energy and achieve sustainability: Exterior Temperature Preservation System, Heating and Cooling System, Application of Geothermal Pump System, System for Optimizing Water Treatment.
Driven by the Company’s regional expansion, contracted sales growth and delivered GFA increase. We estimate the Company’s total revenue in 2014-2016 to be RMB4,887.1 million, RMB6,426.3 million and RMB9,186.9 million, respectively. Underlying net profit in 2014-3016 is expected to be RMB621.5 million, RMB663.4 million and RMB883.0 million, respectively, representing an underlying EPS CAGR of 15.1% in 2013-2016.
‘Accumulate’ investment rating for Modern Land. We believe the Company’s energy-saving and heating and cooling system should provide a higher premium for its products, while air pollution becomes worse in Mainland China. We set our target price at HK$1.63, which implies a 60% discount to its 2014E NAV of HK$4.09 per share, 3.2x underlying 14PE, 3.0x underlying 15PE, 0.67x 14PB and 0.56x 15PB.