It is predicted that the core net profit in 2022 will decline 47% from the same period last year, which is basically in line with market expectations. We expect the company's 2022 revenue to be roughly flat at about 74 billion yuan, and its reported gross profit margin will drop by about 2 percentage points to about 16%. This is mainly due to the de-pressurization of the physical market since 2H21, the company's strategic clearing of parking spaces, late trading and other low gross margin and sluggish inventory, and the inventory impairment may be slightly higher than that of 1.47 billion yuan in 2021. In addition, we estimate that the company's annual exchange loss is more than 500 million yuan (including core net profit). Under the influence of multiple factors, we expect the core net profit to decline by about 47% to 2.07 billion yuan in 2022 compared with the same period last year.
The advantage of financial side is more prominent than that of private enterprises. Thanks to the credit endorsement of major shareholders, the financing channel of the company is more smooth than that of the private sector: in 2022, the public market issued bonds of about 7.8 billion yuan (one medium-term note issued in December, four corporate bonds totaled 3.25 billion yuan), and the net cash flow of financing activities exceeded 2 billion yuan. Considering the sound cash flow management and dynamic control of revenue and expenditure through a 24-month early warning mechanism, we expect the company's net debt ratio and cash short-term loan ratio at the end of 2022 to be generally stable compared with the end of 1H22 (44.9% and 2.3 times of 1H22 net debt ratio and cash short-term loan ratio (including restricted cash), respectively), and due to the lack of land, we believe that the company's pre-debt ratio is expected to drop below 70% by the end of 2022.
Continue to optimize the soil storage structure. In 2022, the company is more cautious in the investment side and acquires only one piece of land in Shanghai (the equity land price is about 600 million yuan). The main focus is on the upgrading and optimization of the stock of land reserves. that is, to promote the selective acquisition and withdrawal of existing cooperative projects, while improving the quality of resources and controlling the risks of partners. By the end of 1H22, the company's land storage and warehouse exchange had been basically completed, and the overall rights and interests increased by 2 percentage points to 69% compared with the end of 2021. We estimate that the unsold value of the company at the end of 2022 is about 300 billion yuan, and the sales coverage for that year is about 4 times. Considering that the company's current land storage market is relatively solid and its financial situation is stable, we expect the company to gradually begin to pay attention to land market opportunities in 2023.
Pay attention to the main points
It is expected that the sales scale in 2023 is generally stable compared with the same period last year. The company's operating announcement revealed that contract sales in 2022 fell 42% year-on-year to 79.2 billion yuan. Despite the continued pressure on the prosperity of the city (45% of land reserves in medium-energy cities at the end of 1H22), the company still adopts a volume-price balance strategy to ensure the quality of sales, and we estimate that the gross profit margin will remain at about 15% in 2022, which is basically the same as that of 2H22. We estimate that the new push size of the company in 2023 will be 700-80 billion yuan, with a stack of about 80 billion of secondhand inventory, and the annual sales scale is expected to be generally stable (corresponding to a removal rate of 50-53%). Benefiting from the recovery of new home sales in some cities, the company accumulated contract sales of 15 billion yuan from January to February this year, a year-on-year growth rate of 6%.
Profit forecast and valuation
Based on the adjustment of gross profit margin, the core net profit forecast for 2022 will be reduced by 31% to 2.07 billion yuan, the profit forecast for 2023 will be maintained at 3 billion yuan, and the core net profit forecast for 2024 will be introduced to 3.01 billion yuan. Taking into account the continued strength of policies at both ends of supply and demand in the industry and signs of stabilization and recovery in the fundamentals of major cities, the target price was raised by 21% to HK $12.05, corresponding to 4.4 times 2023 CPR and 17% upside space in 2024. The company is currently trading at 3.9max 3.8 times 2023 Universe 2024 forward P / E.
Risk
In the main layout cities, the recovery of sales boom was less than expected; settlement profit margins fell faster than expected.