On March 30, the company released its 2022 annual report. The company achieved annual revenue of 430.37 billion yuan, -17.7% year on year; Guimu's net profit was -6.05 billion yuan, -122.6% year on year.

Influenced by multiple factors, short-term performance is under pressure,

In 2022, the company achieved revenue of 430.37 billion yuan, or -17.7% year on year; net profit of the mother was -6.05 billion yuan, -122.3% year on year, accounting for asset impairment losses of about 3.06 billion yuan, +85.3% year on year, and gross sales margin was 7.6%, -10.1pct year on year. The decline in the company's performance is mainly due to (1) being affected by the cold winter of the industry, the company carried over some low-margin projects, causing carry-over gross margin to decline; (2) poor market sales, and the company calculated impairment of some items; (3) the impact of the epidemic on settlement progress and the decline in revenue scale; and (4) exchange rate fluctuations caused exchange losses.

Sales decline, prudent expansion

In 2022, the company achieved equity sales of 357.47 billion yuan, -35.9% year on year, equity sales area of 44.5 million square meters, -33.0% year on year, superior to the industry average, ranking first in the industry in full-caliber sales; the equity repayment amount was 332.5 billion yuan, and the equity sales repayment rate was 93%, reaching more than 90% for seven consecutive years. Against the backdrop of a marked downturn in the industry, the company's land acquisition was relatively conservative. In 2022, the company added about 980,000 square meters of equity land storage, -98% compared to the previous year, and the corresponding equity land payment was 6.1 billion yuan, compared to -96% year on year. By the end of '22, the value of the company's equity soil storage was about 955.5 billion yuan, about 2.67 times that year's sales amount. Land storage was relatively abundant. Among them, Tier 1 and 2 cities accounted for 39%, and Tier 3 and 4 cities accounted for 61%.

The debt structure is optimized, and multiple financing channels are smooth

In 2022, the company's available cash was about 147.55 billion yuan, which remained stable. The total interest-bearing debt balance was 271.31 billion yuan, a decrease of 14.7%. The net debt ratio was 40%, compared to -5.4 pct compared to the previous year. The short-term cash debt ratio was 1.6, and the three red lines reached the green level.

Meanwhile, the company's overall financing costs have been falling steadily, down 0.04 pct to 5.76% from last year. During the reporting period, the company raised nearly 10 billion yuan of debt and distributed shares three times, raising a total of about HK$11.6 billion. At the same time, the company received more than 300 billion yuan of intentional comprehensive credit support from more than ten banks, and its financial situation continued to be optimized.

Investment advice: Country Garden's industry has a leading sales position, sufficient land storage, optimized debt structure, and improved financial security. With the recovery of industry sales, growth is expected to resume in the future. We expect the company's revenue for 23-25 to be 4,704, 4506 and 440.7 billion yuan, and net profit of 80.3, 84.0 and 8.97 billion yuan, corresponding to the current PE of 6.9, 6.5, and 6.1 times, maintaining the company's “buy” rating.

Risk warning: Sales fell short of expectations, and the relaxation of real estate policies fell short of expectations.