There was a marked increase in operating income. Net profit increased year on year. Maintaining the “buy” rating, Pudong Jinqiao released the 2023 three-quarter report. Thanks to the centralized carry-over of the Biyun Zundi project, the company's revenue and profit increased year on year. The company has sufficient marketable real estate resources, real estate rental income has been rising steadily, rental rates have bucked the trend, and the location advantage and industrial agglomeration effect are remarkable. We maintain our profit forecast. We expect the company's net profit from 2023-2025 to be 17.84, 15.06, and 1,937 billion yuan, corresponding to EPS of 1.59, 1.34, and 1.73 yuan. The current stock price corresponding to PE is 6.9, 8.2, and 6.4 times, maintaining the “buy” rating.

Revenue increased in the third quarter, and performance continued to be steady. The company achieved revenue of 5.368 billion yuan in the first three quarters, an increase of 54.2% over the previous year; realized net profit of 1,621 billion yuan, an increase of 52.5% over the previous year; and achieved basic earnings per share of 1.44 yuan, with gross margin and net profit margin of 74.5% and 29.7%, respectively. The reason why the company's overall performance has continued to be steady since the beginning of the year is that the handover of the Biyun Zundi Phase II project, a high-margin residential project, was basically completed, and current sales revenue was carried over and net profit increased accordingly.

The combined leasing and sales operation is gradually getting better, improving professional investment and comprehensive development. The company adheres to the business model of combining leasing and sales. By the end of the first half of the year, it owned a total of about 3.21 million square meters of various types of operating properties, with an average rental rate of 87%, the highest level in recent years. In the first half of the year, the company completed the completion registration of the Office Park Golden Science Park, increased the leasable area by 199,000 square meters, and promoted the preliminary or commencement of construction work on more than 20 projects around the “Golden Central Development Belt”. At the same time, the company has begun the formation of a specialized investment team, gradually improving the direct investment+fund investment business model, and comprehensively developing investment business.

Saleable, abundant land reserves, and great potential for urban renewal

The company has enough saleable residential projects under construction. In the first half of the year, it participated in the selection of implementation entities for the North Bund residential land project in Hongkou District and was identified as the implementing entity. The estimated value of the goods exceeds 7 billion yuan, which will greatly increase the company's land reserves. Construction of the pile foundation project for the 135 neighborhood project began in July, and is expected to achieve market sales in 2024. At the same time, the company's Lingang Group Project and Zhoupu Project are estimated to have a sales value of nearly 18 billion yuan, and the project reserves are abundant. In terms of park resources, the 08 Neighborhood Biyun Commercial Complex project continues to promote urban renewal and the adjustment of the concession plan. It is expected that it will be officially approved within the year; preliminary estimates for the zero-increase land renovation and expansion in Jinqiao South District can add about 400,000 square meters of space.

Risk warning: the risk of project expansion falling short of expectations, industry introduction falling short of expectations, and fluctuations in the price of new housing in Shanghai.