Revenue has soared, and performance has improved dramatically. In the first three quarters of 2023, the company achieved revenue of 16.05 billion yuan, +64.68% year-on-year, and realized net profit of 598 million yuan (-787 million yuan in the same period last year); in the third quarter, the company achieved revenue of 6.304 billion yuan, +366.93% year-on-year, and realized net profit of 114 million yuan (-458 million yuan in the same period last year). The company's high revenue growth and sharp improvement in performance are mainly due to: 1) The stock price of holding financial assets improved sharply year over year. The company's net income from changes in fair value and net investment income for the first three quarters was $37 million (-1,543 million yuan for the same period last year). 2) Project carry-over revenue increased significantly this year.
The delivery of the first phase of Tiantanfu in July contributed to a significant increase in the settlement scale in the third quarter. As of the end of the third quarter, the company's contract debt was 30.541 billion yuan, and future performance is still guaranteed.
Sales performance far exceeds the industry average, and Beijing's regional advantage is obvious. From January to September '23, urban construction development achieved a sales area of 678,000 square meters, +67.0%, and a sales amount of 31.63 billion yuan, +29.5% year-on-year, while the cumulative sales volume of 100 housing enterprises in January-September was -10.3% year-on-year. The company's sales growth rate far exceeded the industry average. The company's impressive sales performance is mainly due to its good layout in the Beijing region. In the first three quarters, the company ranked second in equity sales in the Beijing region. Among them, the company's Tiantanfu project achieved six success, ranking first in the sales list of residential projects in Beijing, with a total turnover of 11.4 billion yuan in the first three quarters of the project.
Stay active in acquiring land and continue to cultivate Beijing deeply. From January to September '23, the company added a total land reserve of 641,000 square meters, +4.7% over the same period. The cumulative land acquisition amount was 14.8 billion yuan, and the land acquisition effort (land acquisition amount/sales amount) was 47%. Among them, Beijing added 2 new parcels of land (a plot of reformed land in Nongxi Village in Chaoyang District of Beijing and a plot of reformed land in Shuangxin Village in Haidian District), with a full-caliber land acquisition amount of 11.4 billion yuan, accounting for 77% of the total land acquisition amount.
The three red lines have been optimized, and the financing advantages are obvious. It is estimated that at the end of the third quarter, the company's net debt ratio was 86.8%, the balance ratio excluding advance accounts was 74.7%, and the short-term cash debt ratio was 2.71, which was optimized compared to the end of '22. Since '23, a total of 2.5 billion yuan of public bonds have been issued, with an average interest rate of 3.4% (4.67% of comprehensive financing costs in '22), and financing costs are expected to improve further.
Investment advice: The company is deeply involved in Beijing, benefiting from the fundamental resilience and policy optimization of first-tier cities, and the reduction of sales is guaranteed. Moreover, as the only real estate development and listing platform under the Urban Construction Group, the company has rich urban renewal resources in Beijing, and is also expected to continue to benefit from subsequent urban village renovation in core cities. We expect the company's EPS in '23 and '24 to be 0.44 and 0.61 yuan respectively. According to the closing price on November 13, 2023, the corresponding PE will be 13.3 times and 9.8 times, respectively, covering the first time, giving it an “increased holding” rating.
Risk warning: Sales recovery falls short of expectations, large fluctuations in foreign investment stock prices, and real estate policy risks.