Event: the company announced the annual performance forecast for 2022, the estimated annual attributable net profit in 2022 is 10.50-1.35 billion yuan, the average value of the forecast is 124.24%; deducting the non-attributable net profit of 9.00-1.1 billion yuan, the average value of the forecast is 120.10%, and the earnings per share is 0.40 yuan per share-0.51 yuan per share, with an increase of 124.59 percent.

The operation passed through the dark moment, and the 2022Q4 operation was affected by the short-term fluctuation of the epidemic. For the whole year, the company's performance increased significantly, mainly due to the low base caused by large amounts of provisions for risky customers in 2021, the overall economy of the real estate industry was low in 2022, and the performance recovered to the 55% range level of 44% in 2020. In a single quarter, according to the calculation of the performance forecast, the net profit attributable to 2022Q4 is-151 million yuan to 149 million yuan, which significantly reduces the loss compared with the same period last year (2021Q4 performance-6.318 billion yuan), but decreases more than the previous quarter, mainly because the epidemic affects the normal construction progress, which leads to the delay of revenue recognition and the loss of impairment. From the point of view of orders, the newly signed orders of 5.002 billion yuan by Q4 company in 2022 decreased by 12.67%, of which the newly signed orders for public clothes, housing and design were 42.27,380,000,000 yuan and 18.87% respectively. The gradual increase in the proportion of public clothes will help to improve the company's business structure and enhance the overall profitability. In 2022, newly signed orders totaled 22.168 billion yuan, down 28% from the same period last year, and 24.836 billion yuan was more abundant for unfinished orders on hand.

Real estate financing benefits frequently, the company may be the first to benefit. In the past two years, due to the credit crisis of real estate enterprises, the industrial demand in the post-cycle of real estate has declined significantly, and the project payment has fallen short of expectations due to the poor financing of real estate. Recently, the government has significantly increased its support to high-quality housing enterprises, invigorating the assets of housing enterprises through a series of tools on the supply side, optimizing the balance sheet to drive the substantive resumption of Baojiao building projects; at the same time, the introduction of policies on the demand side, such as the relaxation of the first set of interest rates, has also played a positive role in boosting consumers' expectations of buying houses and stimulating consumption with rigid demand. We are optimistic about the operating resilience of leading companies in the counter-cyclical period, and are expected to benefit from this round of industry clearance. The company has a strong competitive advantage in the industry: 1) design ability: the company is in the first echelon of the industry; 2) business model: adhere to direct fine operation, project profit margin and turnover rate are higher than peers; 3) management model: the level of corporate governance is leading in the industry, management informatization is expected to further reduce the management granularity and improve the management radius; 4) cost: purchasing main materials and auxiliary materials have cost advantages. To sum up, the company is expected to be the first to benefit during the industry recovery, which is expected to further increase the company's market share.

Investment suggestion: we expect the company to achieve an attributable net profit of 1.222,14,98,1787 million yuan in 2022-2024, with a corresponding EPS of 0.46, 0.56, 0.67 yuan per share, and a corresponding PE of 11.8, 9.6 and 8.0 times, respectively, with an "overweight" rating.

Risk hint: macroeconomic fluctuations, the recovery of the real estate industry is not as expected, and newly signed orders are not as expected.