Biyunzun residence delivery carried forward, real estate sales revenue continued to increase: the company's real estate sales business realized operating income of 3.319 billion yuan in 2022, + 18.73% year-on-year; gross profit margin was 77.74%, a slight increase of 1.91pct over the same period last year; the main reason is that the sales amount of the high-margin Biyunzun residence project is gradually carried forward to revenue. By the end of 2022, the Biyunzun residence project has an area of 373,000 square meters to be carried over, with a carry-over amount of 4.332 billion yuan (including tax). It is expected that this part will be carried forward in 2023, which will form an effective support for real estate sales income and gross profit margin in 2023.

The leasing business is sound, and the rental rate continues to rise: the company holds leasable operating properties mainly in industrial parks, holding a total of 3.02 million square meters of all kinds of operating properties by the end of 2022, and realized real estate leasing business revenue of 1.588 billion yuan in 2022, down 5.46% from the same period last year; gross profit margin 53.34%, lower 6.32pct than the same period last year The main reason is that the company implements the rent reduction policy and reduces the rent for small and micro enterprises and individual industrial and commercial households. But the average rental rate reached 86.6% in 2022, an increase of 2.6pct over the previous year, the highest level in recent years. At present, the company has four industrial projects under construction: 4-02 land project, 29-04 land project, 12B-03 land project and 29right 30-02 land reconstruction and expansion project. The reserve of the park is relatively sufficient in the future. At the same time, with the end of the epidemic and the improvement of the rental rate, the revenue and profit of the leasing business is expected to be repaired.

Financial stability, continuous optimization of financing costs: the company's financial situation has been relatively sound. By the end of 2023Q1, the asset-liability ratio excluding prepaid payments was 50.43%, the cash-to-debt ratio was 1.74, and the net debt ratio was 27.05%. Thanks to its sound operating style, the company's financing costs continue to be optimized, and the average financing cost for the whole year of 2022 is further lower than that of 2021 by 0.43pct to 3.24%.

Ploughing Pudong, actively laying out the central urban area, and actively replenishing the land reserve: relying on years of operation and accumulation in Pudong area, the company continued to pay attention to the residential land in Pudong and won the Zhoupu land in 2022 (with a construction area of about 100,000 square meters, the total investment is 4.6 billion yuan); in January 2023, the company complex was identified as the final main body of the residential land renewal project in Hongkou District. There are plenty of available resources in the future, but we expect the gross profit margin of the newly acquired project to be lower than that of the Biyunzun residence project, and the gross profit margin of the real estate sales business may be under pressure in the future.

Investment suggestion: the company ploughs Jinqiao area in Pudong, Shanghai, focusing on the three sectors of "urban development and sales + operation services + industrial investment" with the two major products of industrial innovation community and Biyun international community as the core. Among them, with the continuous delivery of the Biyun residence project, the real estate sales performance will continue to be released in 2023; as the impact of the epidemic is eliminated and the rental rate rises, the profit from the leasing business is expected to be repaired. From 2023 to 2025, we expect the company to achieve an operating income of 63.83 billion yuan and a net profit of 1.808 billion yuan. The corresponding PE is 8.3, 9.8 and 7.8 times respectively, covering it for the first time and giving it an "overweight" rating.

Risk tips: industrial park rental is not as expected, land investment expansion is not as expected, rental rate is declining, real estate policy is tightened more than expected, financing costs are on the rise, and so on.