Investment suggestion
We downgraded Jindi Group's investment rating from outperforming the industry to neutral. The reasons are as follows:
3Q23's single-quarter performance was lower than market expectations: affected by the settlement progress, 3Q23's operating income decreased by 38% to 15.4 billion yuan compared with the same period last year; during the period, the three-fee rate increased by 4.4ppt to 13.2% compared with 1H23; settlement and joint venture project losses led to investment income of-270 million yuan, asset and credit impairment losses totaling 1.41 billion yuan; finally, 3Q23's homing net profit turned to-1.47 billion yuan. 3Q23's single-quarter results fell below market expectations, dragging down the company's operating income in the first three quarters from a year earlier to 52.3 billion yuan, and its mother's net profit fell 98 percent to 60 million yuan.
Short-term financial pressure has increased: paper cash at the group level has dropped 27% to 33.8 billion yuan compared with the end of 1H23, of which the cash of the last parent company of 1H23 is 16 billion yuan; at the same time, the balance of the company's interest-bearing liabilities has slightly decreased by 5% to 104 billion yuan from the previous month, of which the short-term debt ratio has increased by 3% to 42 billion yuan; driving the marginal ratio of cash short-term debt to 0.8x (1.1x at the end of 1H23), the company's "three red lines" have been reduced from green to yellow. According to public information sources, we estimate that the principal amount of the company's public debt maturing in November 2023 / 1Q24/2Q24/3Q24/4Q24/2025 year / 2026 is 500 million yuan respectively, and the debt repayment pressure is the greatest in March and August 2024, which are 6.5 billion yuan of domestic debt and 480 million US dollars of foreign debt, respectively.
Year-to-date sales and land performance need to be improved: due to the downturn in the industry and the pace of pushing goods, the company's contracted sales in the third quarter fell 42% from the same period last year, dragging down the year-to-date decline of-25% (1H23-15%), weaker than the industry leader (Top10/30/50 is-7% Top10/30/50, 8%, and 11%). We estimate that 4Q23 will have a new push value of about 20 billion yuan around first-and second-tier cities. At the land acquisition level, 3Q23 added 1 case of Changsha land storage, 1-3Q23 accumulated 11 billion yuan of land, corresponding to 9% of the land strength, we estimate that the replenishment value is nearly 30 billion.
What is the biggest difference between us and the market? Combined with the current level of industry prosperity and the current situation of the company, we believe that the capital market has overestimated the improvement progress of the company's operating side and financial side to a certain extent.
Potential catalyst: low temperature in the property market and tighter supervision of pre-sale funds may have a negative impact on the normal operation and financing activities of the company and suppress the subsequent stock price performance.
Profit forecast and valuation
Considering that there is still pressure on the company's settable resources and profit margin, we respectively reduce the forecast value of net profit of 2023 / 2024 by 26% to 3.42 billion yuan, corresponding to a year-on-year change of-44.0% and 10.5%. The company's current share price trades at 0.36max, 0.35 times 2023p, 2024. We downgraded the company's investment rating from outperforming the industry to neutral, and lowered the target price by 35% to 6.37 yuan per share to reflect the recent weakening of investors and the downward revision of the company's profit forecast, corresponding to 0.42 trillion 0.41 times 2023 soybean 2024 market net ratio, 16.7% upside compared to the current stock price.
Risk
Policy-driven fundamentals repair is less than expected; supervision of local pre-sale funds is stronger than expected.