OCBC Investment Research has maintained “hold” on Yanlord Land Group, though it has lowered its fair value estimate to $1.24 from $1.41 on lower gross margin and contracted sales assumptions from the Chinese developer in FY2021, says the team on March 3.
The group’s results for the FY2020 ended December came within the brokerage’s expectations, with 28.1% higher y-o-y revenue at RMB23.9 billion ($4.92 billion). Gross profit increased 13.3% y-o-y to RMB8.7 billion due to lower gross profit margin (GPM) of 36.4%, 4.8 percentage points lower y-o-y.
Yanlord’s management has guided for gross margin of 30% in the FY2021, standing below OCBC’s 35% forecast.
FY2020’s earnings or PATMI fell 22.6% y-o-y to RMB2.6 billion.
Management has also guided for a 11% decline in contracted sales, at RMB70 billion in FY2021, which is a “disappointment” to the team.
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Following the lower target price, which is still pegged to 5 times FY2021’s core earnings per share (EPS), the team has also lowered its core earnings forecast for the FY2021 by 11.6% y-o-y.
Shares in Yanlord closed flat at $1.16 on March 4.
