1H23 performance is in line with previous forecasts and lower than market expectations.
The first share company announced its results for the first half of 2023: revenue increased by 173% to 19.4 billion yuan, gross profit margin decreased by 11.4% to 11.4%, and net profit from home continued a loss of-1.91 billion yuan, corresponding to earnings per share of-0.76 yuan, which was consistent with the performance forecast and lower than market expectations.
The net profit loss of homing is mainly attributed to the decline of gross profit margin of development and settlement, the loss of credit impairment and the loss of changes in fair value: 1) 1H23's after-tax gross profit margin decreased by 3.3pct to 9.7% compared with the same period last year, to the lowest level since listing, but the fee rate has improved, falling 18.3pct to 12.6% compared with the same period last year. 2) 1H23 Company made a credit impairment loss of 250 million yuan, all of which came from the bad debt provision of the associated company Binhu Hengxing's receivables; 3) the company's private equity fund investment suffered a floating loss during the period, recording a fair value change loss of 500 million yuan; 4) the operating profit loss during the period was 1.4 billion yuan, and the profit and loss of minority shareholders increased by 198% to 370 million yuan compared with the same period last year, and finally recorded a net profit of-1.91 billion yuan.
The background of state-owned assets effectively supports the financing side arrangement and the acquisition of high-quality land resources. At the end of 1H23, the company's net debt ratio and deduction debt ratio increased by 9.4/1.7pct to 157% and 72% compared with the end of last year, and the cash-to-short-debt ratio increased to 1.21x (1.03x in 2022). In the first half of the year, the company issued 5 billion yuan of corporate bonds, 9.7 billion yuan of medium-term notes, and approved an operating property loan line of 3.2 billion yuan. By the end of July, the company had acquired 4 homesteads, including 3 in Beijing and 1 in Xiamen, with a total amount of 9.4 billion yuan and a corresponding intensity of 25%.
Trend of development
There is marginal room for improvement in sales performance in the second half of the year. 1H23 achieved full-caliber sales of 34.9 billion yuan, down 20% from the same period last year, and its performance was weaker than the industry average (Top50 real estate enterprises + 2% in the same period). At the end of the period, the company has a stock of 1471 million square meters of soil storage resources under construction, which can cover about 2 years of development demand, and nearly 90% of them are located in ultra-high / high-energy cities, of which 41% are resources in Beijing. With the gradual landing of the demand policy in core cities, we believe that the company's sales in the second half of the year will be more flexible, which is expected to narrow the year-on-year decline for the whole year.
Revenue for the whole year is expected to increase steadily. The company plans to complete an area of about 5.75 million square meters in 2023, an increase of 17% over the same period last year, of which the completed area of 1H23 is about 183 million square meters, which is only 32% of the plan for the whole year. Coupled with the abundant final settlement resources of 1H23, we expect the company's annual revenue to be slightly higher than the same period last year.
Profit forecast and valuation
Taking into account the downside of gross profit margin and the credit impairment of receivables, we reduce the company's 2023 pedigree net profit of 49% of 2024 to 21. 4 trillion yuan. We believe that the quantity and quality of the company's inventory resources are good compared with the medium-and long-term development prospects, and there is still a certain gap between the central state-owned enterprises and the real estate enterprises; but since the beginning of the year, the company's absolute income performance has continued to fail, with a price-to-book ratio (PB-MRQ) of only 0.49 at the closing price on August 25, which means the valuation already has a certain comparative advantage. The company's current share price trades at 0.4 times 2023xb 2024 net market ratio, we maintain outperform industry rating, but lower the target price by 5% to 5.65 yuan per share to reflect the profit forecast adjustment, corresponding to 0.5 times 2023 pound 2024 market net ratio, there is 25% upside compared to the current stock price.
Risk
The fundamental repair was less than expected, the settlement volume was lower than expected, and the scale of asset impairment was higher than expected.