Poly’s Full-Year Results Lower; Earnings Supported by Steady Margin Despite Top Line Shortfall

Poly Developments and Holdings’ preliminary full-year 2020 revenue and attributable earnings of CNY 245 billion and CNY 28.7 billion, respectively, fell short of street expectation. The top line was 12% below our estimate, while earnings were 5% below. The top line shortfall was buffeted by the steady margin, which remained at the high level seen in 2019. Compared with a year ago, the top line and earnings were both up 4% year on year, unchanged from the pace seen during the third quarter. Given the limited share price reaction despite the miss, we think investors are looking forward to the recovery. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. The shares are fairly valued.