Backed by senior Chinese experts, Xi'an achieved year-on-year growth in performance and maintained a “buy” rating

Tiandi Yuan released its 2023 interim report. The company's revenue and profit continued to grow in the first half of the year, sales data increased steadily, investment remained strong, unsold and unsold uncarried resources were sufficient, the debt structure was continuously optimized, Xi'an's deep cultivation of advantages helped improve profitability, and was optimistic that the company's future performance would continue to be released. We maintain our profit forecast. We expect the company's net profit to be 525, 6.49, and 761 million yuan for 2023-2025, corresponding EPS of 0.61, 0.75, and 0.88 yuan. The current stock price corresponds to PE 7.4, 6.0, and 5.1 times, maintaining the “buy” rating.

Performance increased year over year, and gross margin of carry-over projects was under pressure

The company achieved revenue of 4.839 billion yuan in the first half of the year, an increase of 56.07%; realized net profit of 28 million yuan, a year-on-year increase of 219.91%; achieved net operating cash flow of 561 million yuan, and basic earnings per share of 0.0326 yuan.

The high year-on-year increase in the company's revenue was mainly due to a sharp increase in project carry-over area, and the year-on-year increase in net profit and loss for minority shareholders during the same period in 2022, a lower year-on-year basis, and a negative net operating cash flow due to increased land expenses. The company achieved gross sales margin and net profit margin of 11.42% and 0.84% respectively in the first half of the year (24.79% and 6.64% for the full year of 2022, respectively), and the gross margin of carry-over projects was under pressure.

Sales data is rising steadily, and we continue to be deeply involved in Xi'an's base camp

In the first half of the year, the company achieved a contract sales area of 332,800 square meters, an increase of 6.39% over the previous year, and a sales area-to-equity ratio of 75.8%; achieved a contract sales amount of 5.980 billion yuan, an increase of 2.15% over the previous year, and a sales to equity ratio of 83.3%. In the first half of the year, the company acquired new residential land in the Xi'an High-tech Zone, planned to build 222,600 square meters, and continued to be deeply involved in the Xi'an base camp. In the first half of the year, the company started a new construction area of 361,300 square meters, a new construction equity ratio of 100%, and a completed area of 105,100 square meters.

Debt pressure continues to drop, and financing costs are relatively high

The company's total interest-bearing debt in 2022 was 12.91 billion yuan, a year-on-year decrease of 13%; the 2023H1 balance ratio was 87.64%, up 0.36 percentage points from the end of 2022. The company announced a plan for non-public stock issuance in January 2023. The total amount of capital raised was no more than 1.25 billion yuan, for the development of two projects and loan repayment. It was approved by the State Assets Administration Commission in May. A successful issuance would effectively optimize the company's asset structure and improve the company's financial situation.

Risk warning: Policy relaxation falls short of expectations, Xi'an sales recovery falls short of expectations, corporate financing risks.