Sales performance recovered well. Corporate bonds were approved and approved, maintaining the “buy” rating, and Qixia Construction released a report for the third quarter of 2023. The company's revenue for the first three quarters and net profit of the mother were +6.5% and -105.7%, respectively, compared with the same period in 2022, and short-term performance continued to be under pressure. The cumulative equity sales area and sales amount were 76,000 square meters and 2.79 billion yuan respectively, up 0.1% and 19.0% year-on-year respectively, which is a significant improvement over the sales situation in the first half of the year. The company is deeply involved in the Jiangsu market, has relatively abundant cash and saleable resources, and unobstructed financing channels. It is expected that land acquisition and sales scale will continue to improve after the industry recovers. We maintain our profit forecast. We expect net profit from 2023-2025 to be 3.5, 4.0 million yuan, and 4.2 billion yuan, and EPS of 0.34, 0.38, and 0.40 yuan respectively. The current stock price corresponding to PE valuation is 9.2, 8.0, and 7.7 times, respectively, maintaining the “buy” rating.

Net profit of the mother declined year on year, and there are plenty of unsold resources

The company achieved revenue of 3.83 billion yuan in the first three quarters, an increase of 6.5% over the previous year; realized net profit of 12.143 million yuan, a year-on-year decrease of 105.7%, and profit levels continued to be under pressure. The main carry-over projects were Nanjing Qiyuefu and Wuxi Tianyue Yayuan. The project profit level was low. The carry-over gross margin for the first three quarters decreased by 0.5pct to 11.3% compared to 2023H1.

As of 2023Q3, the company's unsold carry-over area is 105,000 square meters, which is supported by steady performance in the short term.

The scale of sales increased year-on-year, and the performance of rental properties was strong

The company achieved equity sales area and sales volume of 22,000 square meters and 750 million yuan respectively in the third quarter, up 46.0% and 77.3% year-on-year respectively over the same period in 2022. The cumulative equity sales area and sales amount during the year were 76,000 square meters and 2.79 billion yuan respectively, up 0.1% and 19.0% year-on-year respectively, which was a significant improvement over the sales situation in the first half of the year (-11.2% and +6.2% of the sales volume of 2022H1 equity sales, respectively). Rental property performance was strong. As of the end of 2023Q3, the total area of rental properties was 93,000 square meters, and revenue was 12.332 million yuan in the third quarter, an increase of 15.5% over the previous year. Total revenue for the first three quarters was 43.349 million yuan, up 21.0% year on year.

The cost ratio for the period needs to be improved. The 1.5 billion corporate bonds were approved and approved, and as of the end of 2023Q3, a total expenditure of 280 million yuan was $280 million, an increase of 36.3% over the previous year. The rate for the period increased by 1.6pct to 7.3% year over year. All rates have increased to varying degrees. Among them, the sales rate increased the most, with an increase of 1.2pct to 2.4% over the same period. The company's balance ratio at the end of the third quarter was 81.3%, an increase of 1.7 pct over the beginning of the year. The company announced that 1.5 billion corporate bonds have been successfully registered and approved by the Securities Regulatory Commission and will be used to repay the issued bonds, which will help the company to operate stably.

Risk warning: The company's sales fell short of expectations, and the recovery of the Nanjing market fell short of expectations.