08
2017-04-25
Guotai Junan Securities noted in the analysis report that the core net profit of Powerlong Real Estate in 2016 met the expectations: total revenue increased to RMB 14.296 billion, showing a 20.1% year-on-year growth; core net profit increased to RMB 1.796 billion, showing a 27.2% year-on-year growth; and future revenue would continue to grow steadily. Guotai Junan Securities also expected that the rental income of Powerlong Real Estate in 2016-2019 would grow at a 23% compound annual growth rate and its profits would be consolidated. Plus the quality land reservation held by the company and the reasonable unit land price, the gross margin would be maintained at around 33.3% in 2017-2019. In addition, it is expected that Powerlong's financing costs will continue to decline.
Meanwhile, as Powerlong's current share valuation is lower than the weighted average value of listed developers in Hong Kong. Based on the current share price, the company's price-earnings ratio in 2017, 2018 and 2019 will be respectively 4.5 times, 4.0 times and 3.4 times. From that, Guotai Junan Securities concluded that the company's share price had been undervalued. As Guotai Junan Securities expects Powerlong’s core net profit would rise, the target price has been conservatively raised to HK$ 4.00.Powerlong’s steady growth in performance in recent years has continued to capture the attention of a number of professional authorities. Half a month ago, Moody's, another international authoritative credit rating agency, has also raised Powerlong’s enterprise rating from B2 to B1 as well as priority unsecured notes rating from B3 to B2; and the rating outlook is stable.