The decline in sales narrowed in the first quarter. In the first quarter of 2023, the company achieved equity sales of 71.87 billion yuan, -27.6% year on year, 9.39 million square meters of equity sales area, -27.6% year on year; of these, monthly sales amount in March was 25.01 billion yuan, -16.9% year on year, sales area 3.02 million square, -22.0% year over year. According to the company's annual report, in 2022, the company achieved equity sales amount of 357.47 billion yuan, and the company's equity sales area was 44.5 million square, or -33.0% compared to the same period, which was better than the average of the top 100 real estate companies; the equity repayment amount was 332.5 billion yuan, and the equity sales repayment rate was 93%, which has reached more than 90% for seven consecutive years. By the end of 2022, the company had obtained equity with a saleable value of 955.5 billion yuan, of which Tier 1 and 2 accounted for about 40%, covering 2.75 times the 2022 sales amount.

Gross profit is under pressure. In 2022, the company achieved operating income of 430.37 billion yuan, -17.7% year on year, realized net profit to mother -6.05 billion yuan, and core net profit of 2.61 billion yuan, -90.3% year over year; due to multiple factors, the company's profit declined, and the company's accrued asset impairment loss was 3.06 billion yuan, +85.3% year over year. Affected by the industry, the decline in operating income and basic operating costs caused the company's gross sales margin to drop to 7.6%, YoY- 10.1 pct; at the same time, financial expenses due to net exchange losses reached 8.38 billion, an increase of 8.05 billion over the previous year. As of the end of 2022, the company's contract debt was 668.16 billion yuan, -5.8% year-on-year, covering 1.55 times the 2022 revenue.

Diversified businesses meet future challenges. After experiencing an unprecedented winter in the real estate industry, the company has actively transformed and developed diversified businesses. Bozhilin Robotics, a subsidiary of the company, has put into commercial use 33 construction robots, covering more than 600 projects in 30 provinces, and has a cumulative application area of more than 10 million square meters. In the future, while maintaining the competitiveness of the main development business, the asset-light escrow and construction business will also become the company's business focus. The company has laid out the escrow market for more than 7 years, and has a total management area of nearly 13 million square meters.

The balance and liability structure is continuously optimized, and financing channels are unobstructed. The company's debt indicators tend to be steady. By the end of 2022, the pre-deducted balance ratio was 69.4%, the net loan ratio was 40%, the year-on-year -5.4 pct ratio, the short-term cash debt ratio was 1.6 times, and the amount of interest-bearing debt was 271.3 billion yuan, down 14.7% year on year, and the three red lines turned green. The company's overall financing channels remained smooth. In 2022, it issued bonds and raised nearly 10 billion yuan. At the same time, 3 equity financings were carried out to obtain a total capital of about HK$11.5 billion. At the same time, the company received intentional comprehensive credit support of over 300 billion yuan from more than ten banks.

Investment advice: Affected by industry sentiment, we adjusted the 2023-25 EPS to RMB 0.17/0.15/0.18, respectively, to maintain the buying rating.

Risk warning: Performance forecasts and valuation judgments fall short of expectations; too rapid sales recovery has led to policy shifts.