Morningstar

CCMGT’s 2022 Results In Line With Profit Warning

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Securities In This Article
Central China Management Co Ltd Ordinary Shares
(09982)

No-moat Central China Management 09982, or CCMGT, reported full-year revenue of CNY 605.7 million and net profit of CNY 303.5 million, both declining by around 50% year over year and consistent with its previous profit warning. While management blamed the widespread downturn in the China real estate market and resurgence of COVID-19 cases for the weak results, we think CCMGT’s heavy reliance on the Henan regional market has added to the slump. Although we are positive on the project management sector—with signs of housing sales rebounding in 2023—we remain cautious that CCMGT’s focus on the lower-tier cities in Henan may lead to a slower recovery. As such, we trim our estimate on newly contracted gross floor area, resulting in a reduction of our fair value estimate to HKD 1.65 per share from HKD 2.90. We do not expect CCMGT to resume meaningful earnings growth until 2025 and predict that the company will postpone its capital investment cycle to 2026-27. That said, for investors with a longer-term appetite, CCMGT’s shares still look cheap as we believe the market is entirely overlooking its business value and the 14.7% dividend yield is attractive.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Jeff Zhang, CFA

Equity Analyst
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Jeff Zhang, CFA, is an equity analyst, Asia, for Morningstar*. Zhang covers mid- to large-cap stocks in the Chinese real estate and consumer durable sectors. He specializes in collating and analyzing industry and company-specific information, preparing valuation models for companies covered, writing analyst reports with effective visual aids, and responding to queries from clients and media. He mainly covers real estate developers such as China Overseas Land & Investment and consumer home appliance companies such as Midea Group and Daikin Industries.

Before joining Morningstar in 2021, Zhang worked for one year in a Chinese private equity investment firm's internal audit department, where he was responsible for leading complex audit projects for the funds and investments that the firm managed. He also worked in Ernst & Young's financial-services department for four years, mainly engaging in sizable external audit projects for multinational insurance and asset-management companies.

Zhang holds a bachelor's degree in finance and economics from the Hong Kong University of Science and Technology and a master's degree in business administration from the University of Oxford. He also holds the Chartered Financial Analyst designation issued by Chartered Financial Analyst Institute, and Certified Public Accountant designation issued by the Hong Kong Institute of Certified Public Accountants.

* Morningstar Asia Limited (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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