Equity Research | (832.HK) Central China Real Estate Limited: Solid 1H20 Results, Earnings Growth On Track

Key Highlights

• The stock is trading 3.5x 2020E P/E for a 28% 2020E earnings growth potential
• On a normalised 30% payout ratio, the stock will still be offering an attractive 9% dividend yield for 2020E, in our view.
• CCRE’s light asset business of project management continues on its growth trajectory, and this segment’s Gross Profit has now reached ~RMB405m (contributing to 13% of 1H20 total gross profit).
• While Completed Properties Held For Sale has also rose to RMB8.26bn at 1H20 (1H19:  RMB4.5bn), but at just 5% of Total Assets, it is still very low compared to industry average.
• We believe stringent cost control to manage GP Margins of contracted sales, and inventory control to contain the rising trend of completed inventory, are key to help the developer to generate free cash flows for future growth.