Revenue grew rapidly, sales investment maintained a high level, and maintained a “buy” rating. Binjiang Group released its report for the third quarter of 2023. The company's revenue remained high, and profit levels remained relatively stable during the period of industry downturn. As the market picked up, the company's profitability was expected to bottom out later. The company has significant advantages in regional cultivation. Sales land acquisition remains steady, and debt volume continues to drop. We maintain our profit forecast. We expect the company's net profit from 2023-2025 to be 44.58, 53.33, and 6477 billion yuan, and EPS of 1.43, 1.71, and 2.08 yuan respectively. The current stock price corresponding to PE is 5.5, 4.6, and 3.8 times, maintaining a “buy” rating.

Revenue increased year over year, and gross margin of carry-over projects was under pressure

The company achieved operating income of 46.393 billion yuan in the first three quarters, an increase of 133.5% over the previous year; realized net profit of 2,473 billion yuan, an increase of 20.23% over the previous year; and gross margin and net profit margin were 14.99% and 6.33%, respectively (17.48% and 9.41% for the full year of 2022, respectively). As low margin projects entered the settlement cycle one after another in 2021, the company's carry-over margin margin was under pressure. Thanks to a sharp increase in carry-over scale and effective pressure reduction in sales and management rates, the company's net profit on the company's net profit increased year-on-year.

Sales reached a new high, and land acquisition intensity remained at a high level

According to Kerry data, the company achieved sales of 122.14 billion yuan in the first three quarters, an increase of 16.2% over the previous year, ranking 10th in the sales ranking of the Lexus industry; it achieved a sales area of 2,536 million square meters, an increase of 24.6% over the previous year. In the first half of the year, the company added 2.49 million square meters of land storage and construction area, equity land payment of 18 billion yuan, land acquisition amount to equity ratio of 45.5%, and land acquisition intensity of 43%. By the end of the first half of the year, the company's total land storage area was 144.85 million square meters, of which Hangzhou accounted for 70.3%. According to Kerri data, the company added 3.218 million square meters of land storage area in the first three quarters, corresponding to a total land acquisition price of 54.62 billion yuan. The amount of land acquisition ranked 7th in the industry, and the land acquisition intensity reached 45%.

The three red lines remain in the green zone, and the financing advantage is obvious

The company's financing channels were unobstructed. The open market raised 4.3 billion yuan in the first three quarters, and successfully issued 700 million yuan of corporate bonds in August, with a coupon interest rate of 4.2%. By the end of the first half of the year, the company's interest-bearing debt was 42.56 billion yuan, down 24% from the previous year; short-term debt accounted for 33.6%, the short-term cash debt ratio was 2.07 times, the deducted balance ratio was 55.7%, and the net debt ratio was 21.5%, all of which were the lowest levels in the past five years. The three red lines had maintained a green level for the past two years, and the debt structure was healthy. The company's 2023H1 comprehensive financing cost was 4.4%, down 0.2 percentage points from the end of 2022.

Risk warning: The recovery in sales fell short of expectations, the decline in the Hangzhou market fell short of expectations, and the company's land acquisition fell short of expectations.