News Alert: FY21 earnings to grow by a moderately higher than expected magnitude on cost control
- CCNL announced after market close that its FY21 earnings is expected to grow by no less than 45% y-o-y, slightly above market and our expectations likely upon better than expected cost control
- Expect the company to cut growth guidance during result briefing in reflection liquidity struggles of CCRE (832 HK) and the ongoing property market turbulence
- Considerable downside risks on consensus FY22-23F earnings that will likely materialize post-result
- Share price uptakes, should there be any, will likely be short-lived in our view
What’s new?
Central China New Life announced after market close that the company expect its FY21 earnings to grow by no less than 45% y-o-y on the back of 1) growth in its property management businesses and Community VAS; and 2) decrease in cost ratios upon efficiency enhancement measures
Our view:
An anticipated profit alert at a slightly better than expected magnitude on cost enhancements. We believe the market in general has anticipated CCNL to release positive profit alert. The company’s indication of no less than 45% y-o-y growth in FY21 earnings did come in slightly above us and market expectations of c.40%, most likely due to better than expected cost control measures.
Likely downward revisions on future growth guidance during result briefing and earnings cuts ahead to weigh on share price performance. Despite a slightly beat in FY21F earnings, we believe CCNL will likely be cutting its growth guidance during its upcoming result briefing to reflect liquidity struggles currently faced by Central China (832 HK) as well as the physical market downturn. Additionally, as referred to our latest sector report (see Time to revisit this neglected sector for details), we believe there remains considerable downside risk of >10% on the company’s current consensus FY22-23F earnings with adjustments likely to come post-result. We therefore believe share price uptake from this positive profit alert, if any, will likely be short-lived.