Short-term performance is under pressure, and operations need to be improved. In the Q3 quarter of 2023, the company achieved operating income of 15.440 billion yuan, a year-on-year decrease of 38.15%, and net profit loss of 1,474 billion yuan, a year-on-year decrease of 207.16%; in January-September, the company achieved operating income of 52.295 billion yuan, a year-on-year decline of 1.47%, and realized net profit of 58 million yuan, a year-on-year decline of 98.27%. The decline in the company's revenue scale is mainly due to the slowdown in the pace of real estate business carry-over. Since 2021, the company's sales scale has shrunk sharply year by year, and carry-over resources are limited, leading to a decline in settlement scale. The company's net profit declined markedly in the Q3 quarter, mainly because: 1) low gross margin projects were carried over one after another, dragging down the company's net profit; 2) calculated impairment affected performance: Affected by the market downturn, the company's Q3 estimated asset impairment losses of 865 million yuan.
The scale of sales continued to shrink, and industry rankings gradually declined. From January to September 2023, the company's full-caliber sales volume was 121.93 billion yuan, a year-on-year decline of 25.2%, and the sales ranking has fallen out of the top ten tiers. Due to limited saleable resources, the company's sales scale across the country has shrunk sharply for two consecutive years, and the industry rankings have continued to decline, falling out of the top ten tiers.
The amount of capital is in and out, and the intensity of investment is clearly limited. Since 2022, the company has adopted a quantitative investment strategy, and the scale of investment has continued to be drastically reduced. In January-September, land acquisition was mainly concentrated in cities such as Shanghai, Hangzhou, Dongguan, and Taiyuan. The total investment amount was about 12.5 billion yuan, a decrease of 43.2% over the previous year. The investment intensity was only 10.3%. According to Kerry's opinion, the value of land storage was increased by 25.17 billion yuan. Due to liquidity pressure, the company's land acquisition has continued to shrink sharply in the past two years. Although the new land reserves are mainly concentrated in core cities or core regions, and the removal speed is relatively fast, there is no significant effect on supplementing the company's saleable resources due to the small volume of added goods.
Financing: The peak of debt repayment is gradually becoming prominent, and cash liquidity is under pressure in stages. As of September 30, 2023, the company's monetary balance was 33.85 billion yuan, and the net debt ratio was 61.0%, an increase of 5.2 pct over the same period last year. The short-term cash debt ratio was 0.81, down 0.58 from the same period last year. According to Wind, in 2024, maturing principal and interest on the company's domestic public debt was about 18.08 billion yuan, and the maturing principal and interest of overseas public bonds was about 504 million yuan. Next year, the company will still face certain repayment pressure and challenges in the open market. However, with the introduction of major demand stimulus policies since the New Real Estate Policy, we expect that with the continued implementation of policies and the gradual impact of the policies, the subsequent market is expected to begin to stabilize and recover, and the pressure on the company's cash flow is also expected to ease.
Profit forecasts and investment ratings: Since 2022, the company's sales and investment scale have been drastically reduced, or the company's carry-over scale and progress may be further affected. We expect the company's settlement pace to slow due to declining sales and investment performance. Therefore, we expect the company's 2023-2025 EPS to be 1.29/1.37/1.43 yuan/share, and the stock price on November 8 corresponding to 2023-2025 PE valuation will be 4.20/3.95/3.79 times, respectively, maintaining the “buy” rating.
Risk factors: The tightening or relaxation of real estate regulation policies falls short of expectations. The decline in sales in the real estate industry exceeded expectations. The company's real estate sales fell short of expectations.