Core views
In the first half of the year, the company achieved 50 billion yuan, a year-on-year decrease of 4.4%; net profit from the previous year was 190 million yuan, an increase of 35.1% over the previous year. The decline in revenue was mainly due to the fact that the rental rate situation for some projects fell short of expectations; the growth rate of net profit for the return was greater than the revenue growth rate mainly due to asset disposal income of 80 million yuan generated in the first half of the year, and the termination of confirmation of usage rights assets and leasing liabilities of the Jin and Daning Financial Intelligence Center project. In the first half of the year, the company developed a new “Tianning No. 1 · Crossing the Border Jinyuan” urban renewal project with a shareholding operation model; by the end of the period, there were 73 projects under management, covering an area of over 1.35 million square meters. With the deepening of urban renewal work in various regions, the company is expected to obtain more project opportunities in the future.
occurrences
The company released its 2023 mid-year report. In the first half of the year, it achieved operating income of 50 billion yuan, a year-on-year decrease of 4.4%; net profit from the parent company was 90 million yuan, an increase of 35.1% over the previous year.
Brief review
The steady increase in performance was mainly due to income from asset disposal. In the first half of 2023, the company achieved revenue of 50 billion yuan, a year-on-year decrease of 4.4%, mainly because the rental rate recovery for some projects fell short of expectations. Achieving net profit of 0.9 billion yuan, an increase of 35.1% over the previous year. The main reason why Gimu's net profit growth rate was greater than the revenue growth rate was that asset disposal revenue of 80 million yuan was generated in the first half of the year, compared to 90,000 yuan in the same period last year. The current asset disposal income was the change in the JinDaning Financial Intelligence Center project cooperation model from leasing operation to entrusted operation, resulting from confirmation of termination of usage rights assets and lease liabilities under the new leasing guidelines.
We are deeply involved in urban renewal in Beijing and Shanghai, and continue to expand new projects. The company actively expanded and signed a cooperation agreement with Beijing Science and Construction Group in the first half of the year to expand the “Tianning No. 1 · Crossing the Border Jinyuan” urban renewal project in Beijing with a shareholding operation model. By the end of the first half of the year, the company had 73 projects under management, the same as at the end of 2022. The projects were concentrated in Shanghai and Beijing, including 61 in Shanghai, 9 in Beijing, 2 in Hangzhou, and 1 in Nanjing. The company has a management area of over 1.35 million square meters, including 770,000 square meters of leased and operated projects, 480,000 square meters of entrusted operating area, and 100,000 square meters of shareholding and operating area. With the deepening of urban renewal work in various regions, the company is expected to obtain more project opportunities in the future.
Maintaining the profit forecast, the target price was raised to $8.32. We forecast the company's EPS for 2023-2025 to be 0.26/0.33/0.40 yuan. The average PE multiplier for a comparable company in 2023 is 26x. As a benchmark enterprise in the field of urban renewal, the company will benefit from the further advancement of urban renewal work in various regions. The company will be given a 20% valuation premium, corresponding to the 32x valuation in 2023, and the corresponding target price of 8.32 yuan (the original target price was 7.54 yuan), and the purchase rating will remain unchanged.
Risk warning:
1. The recovery of the domestic commercial market fell short of expectations, affecting the increase in the rental rate and rental income of the company's projects. There is some uncertainty about the overall growth of the domestic economy. Most of the company's tenants are small to medium tenants. If consumption recovery falls short of expectations, the rental rate and rent increases of the company's projects face some uncertainty.
2. New expansion projects may not progress as expected. The company's new expansion projects may face some uncertainties, causing the progress of construction projects, investment, etc. to fall short of expectations, causing a drag on the company's performance.
3. The pace of project expansion may fall short of expectations and the risk of contract expiration. The company engages in various new projects, and the speed of development depends on close negotiations between the two parties. Some of the company's projects are facing expiration, and there is uncertainty about renewal.