1-3Q23 Performance meets expectations
China International Trade announced the results of the third quarterly report: 1- 3Q23 operating income increased by 14% year-on-year to 2.95 billion yuan, net profit attributable to parent increased by 15% year-on-year to 1 billion yuan; corresponding to 3Q single quarter operating income increased by 8% year-on-year to 1 billion yuan, net profit attributable to parent increased by 17% year-on-year to 350 million yuan, in line with market expectations.
Revenue from leasing properties was realized on schedule and cost control was excellent. 1- 3Q23 Company's main leasing business continued to operate steadily, with rental income increasing by 6% year-on-year to 2.18 billion yuan, of which office/shopping mall/apartment rental income increased by 2%/10% 16% year-on-year to 11.5/9.0/130 million yuan respectively. In a single quarter, office/shopping mall/apartment 3Q rental income increased by 2%/4%/10% year-on-year respectively; In addition, the company's hotel business continues to recover, we estimate revenue at 500 - 600 million yuan. 1- 3Q23 The pre-tax gross profit margin of the Company remained at a high level of more than 60%, and the three expense ratios repeatedly reached a record low of 6.1%, with outstanding expense control effect. Specific sub-formats:
The occupancy rate of office buildings at the end of 3Q23 was flat at 96.2% compared with that at the end of 2Q, with a year-on-year increase of 0.2ppt. 1-9 Compared with the first half of the year, the average monthly rent was also flat at 637 yuan/flat/month, which was 10 yuan/flat/month higher than that of the same period last year and the whole year of 2022. Especially, the average rent of Phase III B buildings increased by 6% year-on-year while the occupancy rate remained basically stable, with outstanding endogenous resilience.
At the end of 3Q23, the average occupancy rate of shopping malls decreased slightly by 0.1ppt to 98.7% month-on-month, basically flat compared with the end of 2022. 1-9 The monthly average rent increased by 11% year-on-year to RMB1271/sq. m.(14 yuan/sq. m. higher than that in the first half of the year), mainly due to the decrease in rent reduction and the increase in royalty rental income; among which, the average rent of Phase III B and East Building increased by 23% and 14% year-on-year respectively.
At the end of 3Q23, the rental rate of apartments continued to increase by 2.3ppt to 84.4% month-on-month, 11.1ppt higher than that at the end of 2022; the average rent from January to September continued to stabilize at about 370 yuan/flat/month, with a slight year-on-year decrease of 3ppt (about 8 yuan/flat/month), mainly due to the continuous increase in the rental rate of large apartments and the lower average rent than that of small apartments.
Trend of development
The annual performance is expected to increase steadily, and the dividend yield enters the attractive range. Considering the resilience of the Company's leased property operation, which is expected to rise steadily throughout the year, and this year is the first year of hotel business recovery, we expect that the Company's annual operating income is expected to maintain steady growth; gross profit margin and expense ratio are expected to continue at the level of the first three quarters; and annual profit is expected to record a year-on-year growth of more than 10%. If the dividend ratio in 2022 is continued, we calculate that the dividend yield in 2023/24 corresponding to the latest stock price of the company is 4.4%/4.8% respectively, which is attractive. We suggest investors pay attention to the allocation value of the company as a defensive high dividend target at the current time point.
Profit forecast and valuation
earnings forecasts remain unchanged. The current share price corresponds to 14.5/13.1 times 2023/2024 earnings. Maintain outperform industry rating and target price of 23.6 yuan, corresponding to 18/16 times 2023/2024 P/E ratio, 26% upside compared with current stock price.
Risk
Occupancy and rental growth of properties held were lower than expected; consumption recovery was lower than expected.