The company adopted a very careful business strategy in 2022 and is the most cautious of high-credit companies.
All companies that have lower financing costs than the company, and even some companies that do not have as smooth financing channels as the company, are more active in acquiring land than companies. This kind of prudence will bring some positive rewards. For example, the company continues to dispose of problematic assets and the regional structure has improved; more stable operation further reduces creditors' concerns and guarantees corporate credit. However, this practice also harbors risks, that is, many of the resources the company can sell are obtained when the land market is hot, and profitability may be limited.
The company's settlement scale remained the same, and its performance fell short of expectations. In 2022, the company achieved revenue of 73.63 billion yuan, a decrease of 0.1% over the previous year, and achieved a net profit of 1.97 billion yuan to the mother's core, a decrease of 49.5% over the previous year. The company's gross margin was 15.4%, down 3 percentage points from 2021. Contract debt at the end of 2022 was $86.14 billion, 1.2 times revenue in 2022. The company's performance fell short of market expectations. The impact of declining settlement profit margins and exchange rate fluctuations without adding land storage was the main reason for the decline in the company's performance.
Sales continued to decline in 2022 and recovered along with the market in early 2023. In 2022, the company achieved sales of 792.4 billion yuan, a year-on-year decrease of 42.2%. The company achieved sales of 15.0.2 billion yuan in January-January 2023, an increase of 5.6% over the previous year. The company benefited from market recovery, and sales repayments recovered markedly. We believe that the overall value of the company's easy-to-remove goods exceeds 200 billion yuan, and the total value of goods exceeds 300 billion yuan. Although the value of goods has declined compared to history, it is still expected to maintain steady sales growth in 2023 with the general trend of credit and recovery.
Eliminate risks and optimize the land reserve structure. At the end of 2022, the company's land storage area was 38.74 million square meters, down 28.2% and 21.8% respectively from the end of 2020 and 2021. The company was extremely cautious in 2022. With unobstructed financing channels, there were almost no new land reserves. However, the company was able to exchange its existing land reserves for birds. On the one hand, the company acquired an additional equity value of 6.3 billion yuan, increasing the land storage equity ratio in high-tier cities; on the other hand, the company also withdrew from some low-tier cities, reducing equity value by 950 million yuan. The exchange of cages for birds itself reduced the number of cooperation projects between the company and partners with higher credit risk, further mitigating the risk of the company's inventory. Although, we believe that the company's profitability may continue to face significant challenges due to the lack of additional land reserves. However, as the company optimizes its inventory structure, it is expected that the smooth flow of the company's cash flow will improve significantly.
Continue to strengthen credit and cultivate professional ability. The company is one of the few private enterprises with unobstructed financing channels.
At the end of 2022, the company's balance ratio after deducting advance receivables was 68.2%, the net debt ratio was 43.9%, the short-term cash debt ratio was 1.60 times, and the average financing cost at the end of the year was 4.62%. Interest-bearing debt at the end of the year was $48.45 billion, down 17.4% and 14.0% respectively from the end of 2020 and 2021. We believe that if the company expects to actively increase its land reserves in 2023, the company also has sufficient funding sources. The company's property management sector has a management area of more than 50 million square meters and a commercial operation area of more than 700,000 square meters. Ruizu Smart's revenue in 2022 increased 33% year-on-year, and various professional capabilities have continued to improve.
Risk factors: The risk that the potential profitability of the company's land reserves is lower than the market average; the risk that land prices will gradually recover after 2023 and the best land acquisition window will gradually close.
Profit forecasts, valuations and ratings: The company adopted a very careful business strategy in 2022 and was the most cautious of high-credit companies. All companies that have lower financing costs than the company, and even some companies that do not have as smooth financing channels as the company, are more active in acquiring land than companies. This prudence will have some positive rewards. For example, the company continues to dispose of problematic assets, and the regional structure has improved; relatively stable operations have further reduced creditors' concerns and guaranteed corporate credit. However, this practice also harbors risks, that is, many of the resources the company can sell are obtained when the land market is hot, and profitability may be limited.
The company still maintained a generous dividend, with a current dividend rate of 8.69%. We gave the company an EPS forecast of 1.61/1.65/1.49 for 2023/24/25 (the original forecast was $2.20/2.07 for 2023/24). Referring to the valuation of high-credit private enterprises 5-7 times the 2023 PE (CITIC Securities Research Department forecast), we gave the company a target price of 6 times PE in 2023, corresponding to the target price of HK$11.00, maintaining a “buy” investment rating.