Powerlong Real Estate raised its contracted sales target from RMB55 bn in2019 to RMB75 bn in 2020. The novel coronavirus outbreak had some impacton the Company’s contracted sales in Jan.-Feb. 2020. However, the Companystill raised its contracted sales target to RMB75 bn for 2020, representing a24.3% increase from 2019 contracted sales. Saleable resources in 2020 isvalued at approximately RMB133.1 bn, indicating a target sell-through rate ofonly 56.3% to achieve the contracted sales target in 2020.
The Company has selected Zhuhai as an entry point for its businessexpansion in the Greater Bay Area. The Company acquired two land plots inZhuhai in 2019 to develop complex property projects, including both residentialand commercial properties. As at 31 Dec. 2019, the Company had a total landbank GFA of approximately 29.73 million sq.m with an average unit land cost ofRMB3,016 per sq.m, representing only 21.3% of its ASP in 2019.
2019 underlying net profit surged by 39.2% YoY to RMB2,681 mn, beatingexpectations. The Company’s 2019 top line grew by 32.9% YoY to RMB26,042mn, mainly driven by increase in sales of residential projects. We expectunderlying net profit in 2020-2022 to reach RMB3,502 mn, RMB4,488 mn andRMB5,540 mn, respectively.
We maintain target price at HK$6.23, representing a 56.1% discount to its 2020ENAV of HK$14.18 per share, 6.4x 2020 underlying PER and 0.6x 2020 PBR. Wemaintain "Buy" investment rating. Risk factors: lower-than-expectedcontracted sales, delayed opening of commercial property projects.