JPMorgan Chase recently released a research report, giving Evergrande Property (06666) a "better than the market" rating with a target price of HK$ 13. JPMorgan believes that Evergrande Property is one of the top three property management companies in China, backed by Evergrande Group (03333; China's top three developers by sales), giving it an outperform rating with a target price of HK$13, equivalent to 25 times the 12-month estimated P/E, which is a big discount to other large-cap peers (> 45 times P/E ratio).
JPMorgan Chase believes that the recent stock price correction is a good buying opportunity, because once the negative news subsides, there will be a strong rebound, and the motivation mainly comes from three aspects: First, there is an opportunity to release an earnings announcement for the first half of 2021 in July, and JPMorgan Chase predicts that there will be a 55% year-on-year earnings growth; Second, the performance in August may be good news for the new area under management; Third, there may be benefits of mergers and acquisitions.
JPMorgan expects Evergrande Properties to grow its core net profit at a CAGR of 42% from 2020 to 2023, making it the top three property management companies in China, with market share growing from 0.9% in 2020 to 2.6% in 2023. The company's advantages in third-party expansion (bidding and mergers and acquisitions) come from national brand recognition, focus on less competitive third-and fourth-tier cities (58% coverage), strong network (some third-party contracts can be obtained from suppliers), and sufficient net cash of RMB 11 billion.