Equity Research | (1996.HK) Redsun Properties Group Limited

Key Highlights

• The developer is on track to beat its 15% contracted sales growth target, while net profit is set for a 40% growth as a reflection of the strong 2018-2019 contracted sales achieved.
• We raise our Target Price by 17% to HK$3.78/sh (offering 40% upside) and maintain our Buy rating.
• YTD July, Redsun has recorded contracted sales of RMB40.8bn with a run rate of 54.4%, outpacing the industry average of 48.8%.
• 2H20E and 1H21E earnings have already been largely secured by unrecognized revenue with RMB23.6bn contract liabilities (236% of 2H20E revenue) on its balance sheet.
• The developer achieved RMB657mn attrib. core net profit in 1H20, growing 30.7% YoY, locking-in 38% of our full year estimates.
• Net gearing ratio also declined slightly to 68.7% from 70.4% as of end-2019, as a reflection of the solid contracted sales and cash collection achieved during 1H20.