Yanlord Land Group Limited (Yanlord) reported a strong set of 2Q18 results which beat our expectations. Revenue accelerated 125.9% YoY to RMB9,663.1m, underpinned by a 184.1% increase in GFA delivered (363.6k sqm), but partially offset by a lower ASP of RMB25,648 psm (-10.0%).

Gross profit jumped 110.8% YoY RMB3,830.9m, and this translated into a lower gross profit margin of 39.6% (-2.8 ppt) due to a change in product mix.

For 1H18, Yanlord’s revenue rose 59.0% to RMB16,851.1m, forming 58.7% of our FY18 forecast. PATMI of RMB2,275.3m represented an increase of 62.9% and this accounted for 65.0% of our full-year projection.

Looking ahead, Yanlord has RMB14.2b of accumulated pre-sales pending recognition, as at 30 Jun 2018, with advances received amounting to ~RMB11.5b.

It has a land bank of 6.93m sqm, which is sustainable for development for approximately five years. Due to its land bank replenishment activities, Yanlord’s net gearing ratio has increased to 78.3%, versus 52.9% as at end-1Q18.

We will provide more details after the analyst conference call. Maintain BUY but we will be reviewing our S$2.24 fair value estimate.

Source: OCBC Research - 15 Aug 2018