Key points of investment:
In 2023, sales were 153.5 billion yuan, the same as the previous year, and the sales ranking rose to 11th place. According to Kerry, the company's sales in 2023 were 153.5 billion yuan, -0.3% year over year, far better than the average value of top 50 real estate companies of -20.7%; Kirui ranked 11th, 2 places higher than in '22; sales area was 3.34 million square meters, +8.4% year over year; average sales price was 42,000 yuan/square meter, -8.0% year over year.
In October 2023, Hangzhou relaxed purchase restrictions and adjusted the scope of purchase restrictions to Shangcheng District, Gongshu District, Xihu District, and Binjiang District. Within the purchase limit area, the company's sales flexibility will also increase with 2 sets of household registration restrictions (2 sets of original households or 2 consecutive social security restrictions for 2 years) and 1 unit with social security or personal tax records for households not registered in the city with social security or personal tax records (1 year of continuous social security for former second-hand housing, 4 years of continuous social security for new homes).
In 2023, the amount of land acquired was 44 billion yuan, Hangzhou accounted for 87%, and the land acquisition/sales ratio was 29%. According to the announcement, the amount of land acquired by the company in 2023 reached 44 billion yuan, of which Hangzhou accounted for 87%; the land acquisition area was 2.84 million square meters, -40.1% year-on-year; and the average land acquisition price was 15,000 yuan/square meter, +0.2% year-on-year. In 2023, the company's land acquisition/sales amount ratio was 29%, the land acquisition/sales area ratio was 85%, and the average land acquisition/sales price ratio was 34%. By the end of '23, the company had a total sales value of 260 billion yuan, of which Hangzhou, Zhejiang (excluding Hangzhou), and others accounted for 56%, 24%, and 20% respectively.
The company is a benchmark for high-quality housing and is expected to benefit from the dual alpha of pattern optimization and quality improvement. We believe that China's housing demand structure will be fragmented, and that high-quality housing corresponding to improved demand will usher in broad room for growth. On the supply side, according to data from the Qipuhe Bureau of Statistics, we estimate that the current urban housing stock in China is about 34.4 billion square meters, of which the total number of high-quality housing units is about 8.2 billion square meters, with a penetration rate of about 24%; on the demand side, moving up in the age structure of the population, increasing the level of education, and increasing the share of families with many children will gradually explode. We estimate that the proportion of demand improvements in the 2023-30 year will reach 44%. This means that the average annual increase in the penetration rate of high-quality housing will reach 600 million square meters, corresponding to a scale of 6.5-8.3 trillion yuan, which means a high meaning The new quality track has plenty of space. Meanwhile, the company maintains an average sales price of around 40,000 yuan/square meter, focusing on high-quality residential projects in Hangzhou; it has established five major product standardization systems in 2008. Currently, it has four major product systems and 15 standard versions. It has been deeply involved in Hangzhou for 30 years, leading the quality luxury property industry. Red Pan, led by Wulin No. 1, is famous in Hangzhou, which is expected to benefit from the double alpha of pattern optimization and quality improvement.
The three red lines remained steady in the green zone, and financing costs fell at a low level. According to the announcement, we calculated that as of the end of 23Q3, the company continued to be in the three red lines, with a pre-debt ratio of 59.1%, -8.5pct year over year; a net debt ratio of 14.2%, 46.6pct year over year; and a short-term cash debt ratio of 3.2 times, +1.7 times year over year. Interest-bearing debt at the end of 23Q3 was 38.6 billion yuan, or -22.8%; bank loans and bonds accounted for 76% and 24% of interest-bearing debt at the end of 23H1, respectively; the average financing cost was 4.40% lower than 22-20BP. Recently, the company successfully issued a number of bonds: 23/6/16 with 600 million yuan/ 3.95% /2 years; 23/7/3 with short loans of 900 million yuan/ 3.85% /1 year; 23/7/21 with 600 million yuan/ 3.85% /2 years; 23/8/1 issuing 700 million yuan/ 4.20% /2 years of corporate bonds. The company plans to keep the equity and interest-bearing debt within 47 billion yuan in 23 years (same as the previous year), keep the scale of direct financing within 20%, and reduce financing costs by 10-20 BP.
Investment analysis opinion: A benchmark for high-quality housing, while benefiting from pattern optimization and quality improvement, maintaining a “buy” rating. Binjiang Group has been deeply involved in Hangzhou for 30 years. Since 2015, the company's sales shift has accelerated, and the company's sales ranking has risen to 11th place in the industry in 2023. In recent years, the company has actively expanded its land acquisition. The average land acquisition/sales amount ratio in 2015-21 reached 60%, and reached 48% in 2022. The company focused on the Greater Hangzhou region. Currently, Hangzhou accounts for 56% of the saleable value, which will give the company greater sales flexibility in the future. Considering that industry sales and profit margins are still under pressure, we lowered the company's 23-25 profit forecast to 41.3/47.5/5.72 billion yuan respectively (original 45.0/51.9/5.97 billion yuan), corresponding to 24-year PE of 4.6X. We are optimistic that the company will also benefit from pattern optimization and quality improvement as well as improvements in the quantity and quality of land acquisition in the past two years to give flexibility to later performance and maintain a “buy” rating.
Risk warning: Real estate regulation policies have been tightened beyond expectations, removal rates have fallen short of expectations, financing has been tightened, and costs have risen.