The sales scale has been growing for 2 consecutive years, and the national ranking has risen rapidly. According to the company's business report, Yuexiu Real Estate achieved sales volume of 142 billion yuan in '23, exceeding the sales target at the beginning of the year (132 billion yuan), and further upgraded to 12th place in the national sales ranking, with a scale gap of only about 10 billion yuan. Looking at the growth rate performance, the company's size increased 13.6% year on year. It is the only company that achieved positive growth for two consecutive years, and the growth rate was driven by both volume and price. A steady and clear investment strategy and strong leverage restrictions in the early stages provided the company with momentum to move through the cycle.
Land investment is the highest, with first-tier cities accounting for more than 60% of the amount. In terms of land investment, the total amount of land acquired by Yuexiu Real Estate in '23 was 59.7 billion yuan, corresponding to 42% of the land acquisition effort. The scale of equity investment remained the same as in '22, and the horizontal comparative expansion is still ahead. In terms of distribution, all of the land added in 23 was located in Tier 1 and 2 cities. Among them, the share of the first tier reached 62%, an increase of 10 pct compared to '22, and the share of Guangzhou decreased, and the share of moving north increased, increasing the energy level while diversifying the risk of the single market.
The relatively more stable fundamentals of high-energy cities are the foundation for the steady performance of the company's overall scale.
Stock and bond financing channels are smooth, and there are sufficient resources on hand. In June '23, the company completed a share offering of 929 million shares and raised about HK$8.3 billion, adding a large amount of working capital to the company, further enriching its available resources, and laying a solid foundation for subsequent supplementing high-quality land storage and achieving resource transformation.
Profit forecasting and investment advice. It is expected that the company's future sales and revenue will continue to grow steadily, and profits fluctuate due to downward pressure from housing prices. Net profit from 23 to 24 was 3.3 billion yuan/3.6 billion yuan, -16%/+7% year-on-year, corresponding PE is 5.7x and 5.3x. Considering asset impairment caused by housing prices, the company was given a reasonable valuation corresponding to 0.8 times PB of net assets due to the end of '22, considering the exchange rate of 0.91 RMB/HKD, corresponding to a reasonable value of HK$10.37 per share, maintaining a “buy” rating.
Risk warning. The impact of fluctuations in the single market; the recovery in the industry sentiment falls short of expectations on sales and profit margins; insufficient housing price expectations put pressure on gross sales margins; and the policy environment has not improved as fast as expected.