Forecast earnings will fall by 244-317% year on year.
KuaiBao, the results of the first share release in 2022, is expected to have a net profit loss of 10-1.5 billion yuan, down 244% and 317% compared with the same period last year, which is lower than the market and our previous expectations, mainly due to the decline in gross profit margin of the development business and the loss of joint ventures that exceeded expectations.
Pay attention to the main points
Performance pressure is released and losses are expected to be reversed in 2023. Affected by the declining real estate market and epidemic prevention and control, the company's completion progress in 2022 is slow, and we expect the company's annual operating income to decline by about 30% compared with the same period last year. Due to the concentrated carry-over of high land price projects during the period, we expect after-tax gross profit margin to fall by 2-3 percentage points year-on-year to about 13% (15.4% in 2021). The large loss of the joint venture project and the decline in the value of the transactional financial assets held by the joint venture project resulted in a loss of 10-1.5 billion yuan in the company's performance. Looking forward, we believe that with the gradual recovery of settlement scale, the stabilization of gross profit margin and the active promotion of asset disposal, the company is expected to turn a profit in 2023 and achieve growth in 2024.
The overall sales are sound, pay attention to the replenishment efforts of the company in key cities such as Beijing. 4Q22's single-quarter sales growth rate turned positive to 1.5% year-on-year (1Q/2Q/3Q year-on-year was-27%), driving full-year sales to 87 billion yuan, narrowing the decline to 24%, better than the industry as a whole (sales of the top 100 real estate companies fell 42%), and the corresponding Kerry rose to 21st place (38th at the end of 2021). In 2022, the company added 4 new land in Beijing and Fuzhou by means of auction, capital increase and stock acquisition, and the overall land acquisition intensity was on the low side (the land acquisition intensity was about 15% and 50% in 2021). However, considering that the company has sufficient land reserves (estimated to be worth about 300 billion yuan at the end of 2022) and has a strong willingness to replenish goods, we believe that the company's follow-up sales growth rate is expected to continue to outperform the industry's performance; it is expected that the follow-up company will continue to focus on high-energy cities. Investors are advised to pay attention to the company's participation in the concentrated soil auction in Beijing.
The financial side is continuously optimized and the financing channels are smooth. At the end of 3Q22, the balance of interest-bearing liabilities decreased by more than 8 billion yuan compared with the beginning of the year, and the net debt ratio, pre-debt ratio, and cash-to-debt ratio (excluding restricted funds) decreased by 9ppt, 2ppt, and increased by 0.7 times to 139%, 72%, and 2.2 times respectively compared with the beginning of the year. We expect the company to continue to reduce the scale of interest-bearing liabilities and optimize the "three red lines" indicators in 2023, and may be expected to fall to "green" by the end of the year. At the same time, as a local state-owned enterprise, the company has a strong financing advantage, with 25.6 billion yuan of new bond financing in 2022, with a weighted average coupon rate of only 3.66%, which may lead to a further reduction in stock financing costs (4.85% at the end of 2021).
Profit forecast and valuation
Taking into account the declining profit margin during maturity and the losses recorded by the joint venture, we have lowered our 2022 results from a loss of 200 million yuan to a loss of 1.25 billion yuan, leaving the 2023 prime profit forecast unchanged in 2024. The company's current share price trades at 0.5 shock, 0.5 times 2023 Universe, 2024 Pswab B. Maintain an outperform industry rating and a target price of 7.03 yuan, corresponding to 0.6 apiece, 0.6 times 2023 Universe B in 2024, 21% upside compared to the current stock price.
Risk
The speed and extent of the recovery of the real estate market are not as fast as expected; the scale, quality and speed of expansion and storage are not as expected.