23H1 lost money again and maintained its “increase in holdings” rating
The company released its semi-annual report on August 30. 23H1 achieved revenue of 19.44 billion yuan, +19% year-on-year; Gimu's net loss was 1.31 billion yuan, and profit for the same period last year was 110 million yuan. We maintain a profit forecast of 23-25 EPS of 0.06/0.39/0.48 yuan, but it should be pointed out that the company still faced inventory impairment pressure in '23, and uncertainty about performance increased. Comparable companies have an average 24PE of 11 times. Although the company has a leading position in cultural tourism real estate, its performance is still absorbing historical burdens. We have narrowed our valuation premium and believe that the company's reasonable 24PE is 13.5 times, and the target price is 5.27 yuan (previous value 5.85 yuan, based on 15 times 24PE), maintaining the “increase in holdings” rating.
Profit margins declined, asset impairment, and financial expenses led to losses. Liquidity management was strengthened, and 23H1's carry-over scale increased, driving real estate business revenue +56% to 9.1 billion yuan; comprehensive tourism business revenue was -2% year-on-year to 10.3 billion yuan, which remained stable. There was a loss in net profit due to: 1. Some projects were underlocated, the cycle was too long, and the removal rate fell short of expectations. The gross margin of the real estate/tourism integrated business was -6.2/-4.6 pct to 18.2%/20.8%, respectively; 2. Asset impairment losses increased by 380 million yuan to 4.4 billion yuan year on year due to price reductions and removal of some projects; 3. Reduced interest capitalization led to financial expenses of +850 million yuan to 1.38 billion yuan. The company strengthened liquidity management and optimized the debt structure through long-term and short-term debt swaps. 23H1 net operating cash flow was corrected year-on-year. Short-term debt coverage reached 2005. Of the 134.3 billion yuan of interest-bearing debt, maturing within one year accounted for only 12%.
Real estate: Land acquisition efforts have recovered, and the expansion of the scale of property management has accelerated
23H1's sales amount was -16% year-on-year to 22.8 billion yuan. It adopted a flexible sales strategy for some projects and accelerated the promotion of decentralized repayment. The company's land acquisition efforts have recovered. Three new parcels of land were added in Foshan and Wuxi, with a total land acquisition price of 6.2 billion yuan. The land acquisition intensity was 27%, a significant increase from 5% in the year 22, and the equity ratio reached 90%. As of 23H1, the company still has 11.45 million square meters of floor space that can be developed, and the land reserves are still abundant. In addition, the scale expansion of the company's property management business accelerated. 23H1 had a management area of 62.15 million square meters, +33% compared to the end of '22. The management scope covered 374 projects in 56 cities.
Cultural tourism: Seizing the recovery trend, steadily advancing project expansion and the renewal of mature projects, 23H1's corporate tourism projects received more than 44 million visitors, +74% over the same period last year. The company closely follows market consumer demand, and cultural tourism projects such as Happy Valley and Maya Water World have launched a variety of themed activities and cooperated with well-known IPs. In addition, the company has reached asset-light export agreements with the local government for the first phase of the Changsha Cultural Tourism Comprehensive Project (Family Park); the Beijing Maya Beach Water Park Project has carried out major construction and equipment infrastructure construction; and the Shenzhen Happy Valley Adventure Mountain Project has completed equipment procurement and entered the civil construction stage.
Risk warning: downside risks in the real estate industry, downside risks in profitability, and cultural tourism project management risks.