1H23: Profits have declined, and the scale of debt has declined; maintaining the “buying” company's 1H23 results: revenue of 36.3 billion dollars, +15% year on year, gross margin -4.7 pct to 13.2% year on year, core attributable net profit of 860 million, -48% year on year. The decline in profit was mainly due to the high unilateral cost of carrying forward projects and increased inventory depreciation during the reporting period. We maintain the company's revenue and gross margin forecasts, and the net profit corresponding to 2023-25E is 1744/1830/2010 million yuan. The average value of the comparable company's 2023E PE is 10.9 times (Wind unanimously expected), and the company's land storage is mainly located in third- and fourth-tier cities. We think the company's reasonable 2023E PE is 8.6 times, adjusted the target price to 11.44 HKD (previous value: 11.46 HKD), and maintained the “buy” rating.
Sales were basically the same year over year, and the land acquisition side still needed to recover
The company's 1H23 sales volume was 40.6 billion dollars, +1% year-on-year. Among them, the Yangtze River Delta and the Greater Bay Area contributed 50% and 17% of sales shares respectively. Due to structural optimization, the company's average sales price of 1H23 remained resilient, with a year-on-year ratio of +3% to 12653 yuan/flat. The company added 3.6 billion dollars in land reserves in 1H23, -43% over the same period last year. By the end of 1H23, the company had a stock of 28.62 million square meters of unsold land reserves, of which 72% of equity accounted for +3pct. In the first half of the year, it acquired new high-quality land plots in core cities such as Guangzhou, Foshan, and Changsha. Second-tier cities and above accounted for +1 pct to 67% of the previous year.
The size of debt has declined, and short-term debt repayment pressure is less
By the end of 1H23, the company's “three red lines” index remained at the green level. At the end of the period, interest-bearing debt was 43.8 billion yuan, -10% compared to the same period, and the debt size declined; short-term debt accounted for 28%, and there was no exposure to US dollar debt, and the debt structure was reasonable. The company's interest-bearing debt maturing within one year is 12.4 billion dollars, the average monthly debt to be repaid is only 1.03 billion dollars, and the open market debt that needs to be matured and paid within 23 years is only 8.4 billion yuan left. Short-term debt repayment pressure is low. By the end of 1H23, the company had a bank credit limit of 151.7 billion dollars, of which the amount not yet used was 111.8 billion dollars, and the net debt at the end of the period was only 39.8%, which could provide the company with sufficient room to expand its statements.
The non-development business gradually improved, the share of third-party business on the real estate technology platform increased by 1H23, and the company's undeveloped business development gradually improved: 1) Ruizu Intelligence added 600 million dollars in contracts, and the third party business accounted for 36%, +10 pct over the previous year. 2) Ruishu Construction Co., Ltd. added 400 million dollars in contract amount, accounting for 100% of the third party business, +10 pct over the previous year, and secured orders for modular construction products of no less than 500 million HKD per year for the next 3 years through Hong Kong supply alliances and channel cooperation. 3) Property management revenue was 7.2 billion yuan, +30% year-on-year; contract/management area was 9114/58.6 million square meters, respectively, +1%/+10% month-on-month; among them, third parties accounted for 20%, non-residential accounts for 13%, and 1H23 Xintuo's housing business increased, with industrial park expansion accounting for 65%. 4) The commercial operation and management area exceeded 700,000 square meters, achieving 29.59 million passenger traffic, +73% year-on-year, and sales of 1.4 billion yuan, +27% year-on-year.
Risk warning: The downturn in the industry weakens the company's ability to finance; profitability and sales growth fall short of expectations.