Incident: On January 8, the company released recent operating data; on January 19, the company successfully issued an additional invoice of 700 million yuan on the Macau Financial Exchange; on January 27, Guangzhou issued a notice to liberalize purchase restrictions on housing over 120 square meters.
Comment: The company's sales are resilient, and its land acquisition and financial performance are steady. Guangzhou has relaxed purchase restrictions or helped the company's sales.
Sales bucked the trend and 23H2 sales pressure increased: In 2023, the company achieved sales of 142.03 billion yuan, up 13.6% year on year, and sales of the top 100 real estate companies were -17.7% year-on-year. The company has maintained contrarian growth for two consecutive years and sales resilience; among them, the average monthly sales of 23H1 and 23H2 companies were 13.9 billion yuan and 9.7 billion yuan, respectively. The year-on-year performance differentiation was mainly related to the historical base and the cooling of the 23H2 market sales environment.
Maintain a high level of land acquisition intensity and focus on core Tier 1 and 2 cities: In 2023, the company added a total of about 3.848 million square meters of land storage, with a total land price of about 56.41 billion yuan (company announcement data, final data subject to annual report disclosure), maintaining a high level of intensity. Among them, new land storage was mainly distributed in 11 core Tier 1 and 2 cities, with first-tier cities accounting for about 65.3% of investment. The top three cities for land acquisition amount were Guangzhou (15.74 billion yuan), Beijing (13.85 billion yuan), and Shanghai (72.6 billion yuan) , the core soil reserves are abundant.
Guangzhou relaxes purchase restrictions or helps the company's sales performance: According to Kerry statistics, the company achieved sales of 64.01 billion yuan in Guangzhou in '23, accounting for about 45.1% of the company's annual sales (42.5% in 2022). As of June '23, the company had 11.34 million square meters of land storage in Guangzhou, accounting for 40.3% of the company's total land storage, and there is plenty of saleable value in Guangzhou. On January 27, Guangzhou announced property market optimization policies, including liberalizing purchase restrictions for homes above 120 square meters in restricted purchase zones, supporting “rent one buy one”, and supporting “sell one buy one”, etc., which may increase Guangzhou's demand for home purchases. Considering the company's deep involvement in the Guangzhou market, the new Guangzhou property market policy may help the company continue to increase sales in Guangzhou.
Financing channels are unobstructed, and the credit advantage is obvious: on January 19, the company successfully issued an additional invoice of 700 million yuan on the Macau Financial Exchange. After merging with the 510 million yuan notes issued in November 23, the amount was 1.21 billion yuan, and the coupon interest rate was 4%. Throughout '23, the company issued 6.9 billion yuan of domestic corporate bonds through domestic bond issuing platforms, with coupon interest rates between 2.98% and 3.63%; the company issued 4.606 billion yuan of overseas bonds, with coupon interest rates between 3.8% and 4.0%; the company's domestic and foreign open market financing channels remained unobstructed, and comprehensive financing costs continued to decrease.
Profit forecast, valuation and rating: Considering the slow recovery of the national sales market, and the significant year-on-year decline in second-hand housing prices in first-tier and second-tier cities in December '70 as announced by the Bureau of Statistics, or increasing the company's inventory impairment pressure and affecting the progress of gross sales margin growth, we lowered the company's core EPS forecasts for 23-25 to 0.89 yuan (16.2% reduction), 0.97 yuan (21.6% reduction), 1.17 yuan (20.6% reduction), and 1.17 yuan (20.6% reduction). The current stock price corresponds to the 23-25 PE (core) valuation of 5.3 Double, 4.9 times, 4.0 times. As an established state-owned real estate enterprise in Guangzhou, the company is deeply involved in the Greater Bay Area, actively strengthens the layout of the core city, has excellent sales performance, is stable in financial capital, is optimistic about the company's development potential, and maintains a “buy” rating.
Risk warning: Risks such as sales and land acquisition falling short of expectations, project delivery falling short of expectations, and market downturn exceeding expectations.