Performance continues to be adjusted to maintain the “increase in holdings” rating
The company announced on April 28 that it achieved revenue of 435.5 billion yuan in '22, -20% year on year; Guimu's net profit was 1 billion yuan, -84% year on year, lower than our expectations (7 billion yuan). 23Q1 achieved revenue of 78.8 billion yuan, -18% year on year; net profit of the mother was 2 billion yuan, -22% year on year. Referring to infrastructure contracts and real estate operations in '22, we lowered revenue and gross profit margins. We expect EPS to be 0.25/0.43/0.49 yuan in 23-25 (before 23/24, the value was 0.57/0.64 yuan). We believe that the company's 23-year performance was greatly disturbed by liquidity pressure. The valuation benchmark for '24 should be used. Comparable to the company's average of 24PE was 8.2 times (Wind's expectations are consistent with Wind's expectations). Considering that the company's operations are relatively uncertain, its reasonable 24PE is 7 times, and the target price is 3.01 yuan (previous value was 3.25 yuan, based on 6.5 times 22PE), maintaining the “increase in holdings” rating.
The 22Q4 impairment dragged down performance, and real estate revenue was supported by guaranteed delivery. The 22Q4 company calculated impairment losses of 3.93 billion yuan, which led to a large year-on-year decline in annual performance. Looking at the real estate business as a whole, the company's delivery area was +11% compared to the same period last year, with the support of the insurance delivery policy, helping to maintain the scale of real estate revenue by -6% year on year to 192.6 billion yuan; however, due to declining industry profit margins and discounts promoting repayment, gross margin was -3.8pct to 17.1% year-on-year. By the end of '22, the company still had 348.8 billion yuan of unsold resources. As insurance delivery continues to advance, we expect real estate revenue to remain large in 23-24. In terms of infrastructure business, the amount of new contracts signed in '22 was -32% to 486.3 billion yuan, and revenue was -33% year-on-year to 209.5 billion yuan. However, the gross margin was +0.5pct to 5.4% year-on-year, driven by business restructuring and cost reduction and efficiency.
The year-on-year decline in sales in 23Q1 narrowed markedly. The land storage scale was still abundant. In '22, the company continued to promote the removal and monetization of existing properties such as commercial orders, corner assets, and hotel assets. The sales amount reached 54% year-on-year to 132.3 billion yuan, of which residential accounts for -22pct to 55% year-on-year, sales repayment was 143.3 billion yuan, and the repayment rate was +12pct to 108% year-on-year. With the weak recovery of the real estate market, 23Q1 companies achieved sales of 27.2 billion yuan, and the year-on-year decline narrowed to 12%. By the end of '22, the company's total land storage area was -14% year-on-year to 157 million square meters. Of these, the land area under construction and proposed construction were 130 million square meters and 27 million square meters respectively. Even though no land has been acquired since '22, the scale of land storage is still quite abundant. If real estate fundamentals continue to recover, we expect the decline in the company's sales amount in '23 to be significantly narrower than in '22.
Continued promotion of debt reduction, foreign debt was extended as a whole
As a result of paying close attention to repayments, suspending land acquisition, reducing costs and increasing efficiency, the company achieved net cash flow from operating activities of 27.4 billion yuan in '22, further reducing interest-bearing debt by 23.1 billion yuan to 217.5 billion yuan. 23Q1 continued this trend. In November '22, the overall rollover request for the company's nine foreign bonds (totaling US$3.241 billion) was approved by the holders, which is expected to help the company overcome the liquidity dilemma and push various businesses back to a normal development trajectory as soon as possible while insuring delivery.
Risk warning: epidemic, capital chain, real estate policy, downside risks in the real estate market.