Items:
The company released a report for the third quarter of 2023 that its operating income in the first three quarters of 2023 was about 5.212 billion yuan, an increase of 32.83 percent over the same period last year, and its net profit was 4 million yuan, down 94.53 percent from the same period last year.
Comments:
Q3 completion settlement slowed, gross profit margin continued to be under pressure. 1) completion settlement slowed down. In the third quarter, the completed area was only 0.41 million square meters, and the operating income was 373 million yuan, down 54.66% from the same period last year. 2) the company's operating income in the first three quarters was about 5.212 billion yuan, an increase of 32.83% over the same period last year, and the gross profit margin was about 11.6%, which was lower than that of 2022 by 13.2pcts.
Benefiting from the good performance of the real estate market in the core areas of Xi'an and Suzhou, the company has a sales volume of about 8.3 billion in the first three quarters and is expected to achieve its annual sales target of 10.5 billion. 1) from January to September 2023, the company realized the contract sales area of 439500 square meters, down 3.3% from the same period last year; the contract sales amount was 8.29 billion yuan, an increase of 1.1% over the same period last year, of which the equity contract sales amount was 7.07 billion yuan, and the equity ratio was about 85%. 2) according to the sales ranking of Cerexian and Suzhou real estate enterprises, the sales of Tiandi and Diyuan in the two cities from January to September 2023 were 3.8 billion and 3.1 billion respectively, totaling 6.9 billion yuan, accounting for about 83% of the total sales. 3) according to Kerry, from January to September 2023, the sales area of commercial housing in Xi'an was 6.1 million square meters, an increase of 2.8 percent over the same period last year, of which the sales area of the high-tech zone was 1.54 million square meters, an increase of 28 percent over the same period last year, and the sales amount was 37.9 billion, an increase of 34 percent over the same period last year.
The company has high soil storage quality, high brand awareness and rich experience in deep ploughing cities. 1) some local state-owned enterprises occupy a relatively high proportion of land in the suburbs of the city, while Tiandi Source in the deep ploughing city of Xi'an only focuses on the basic high-tech zones with a better real estate market. By the end of 2022, the company's land reserve was about 3.29 million square meters. Among them, Xi'an soil storage accounts for 47%, and high-tech zones account for 92% of Xi'an land storage. 2) in 2023, the company was in Yongan, Washington, Xi'an, and sold well against the trend; Guantang in Pingjiang, Suzhou, both increased and eliminated by more than 90%; Xianyang Fang and Hexi Valley ranked first in the local market in the first half of the year.
In the first three quarters, only one case of homestead in Xi'an High-tech Zone was obtained, the completion of land construction was 49%, and the completion of the amount of land was 13%. There was a certain pressure on land in the fourth quarter. 1) the company plans to add about 450,000 square meters of reserve land in 2023, and the amount of land taken will be about 6.5 billion yuan. 2) in January 2023, the company acquired a residential land development right (with a capacity of about 210,000 square meters) in Xi'an High-tech Zone by acquiring 55% stake in Xi'an Junzheng Project Company (Xi'an Jiaxing), with a consideration of about 720 million yuan. In September 2023, the company acquired the remaining 45% stake in Xi'an Jiaxing, with a consideration of about 130 million yuan.
Investment suggestion: the company holds the core high-tech zone market in Xi'an, and has accumulated a good reputation in Xi'an, strong trading ability, and has a strong sustainable advantage in both the land end and the brand end. Even without considering growth, the company in Xi'an, Xianyang, Suzhou market can ensure a good stability of the company, a reasonable valuation of about 4.7 billion yuan. We estimate that the EPS of the company from 2023 to 2025 is 0.53,0.58,0.63 yuan respectively (the previous value is 0.53,0.59,0.64 yuan). According to the residual income valuation model, the reasonable valuation of the company is about 4.7 billion yuan, with a target price of 5.40 yuan in 2023, corresponding to 10 times PE in 2023, maintaining the "recommended" rating.
Risk Tip: the industry continues to shrink the table unilaterally, and the market goes down faster than expected.