Expected net profit of RMB 470-704 million in 2023
The company released a performance forecast on January 30. It is expected to achieve net profit of 470-704 million yuan in 23, turning a year-on-year loss into a profit. Considering the real estate market situation, we raised asset impairment losses and lowered gross profit margin for 23-25, and adjusted the 23-25 EPS to 0.30/0.62/0.75 (previous value: 0.43/0.80/0.96 yuan). Comparable to the company, the average of 24PE is 10.72 times. Considering the company's continuous performance and abundant resources in the core city, we believe that a reasonable 24PE is 14.56 times, maintaining a target price of 9.03 yuan, corresponding to 1 times PB (calculated based on net assets attributable to the mother excluding perpetual bonds at the end of '22) to maintain a “buy” rating.
The results of 2023 are reversed, and there are plenty of resources to be carried over in the future
2023 was the year the company turned losses into profits. On the one hand, performance loss occurred in 2022 due to fluctuations in transactional financial assets, and the impact changed from negative to positive in 2023 (based on shareholding data estimates, we expect profit of 170 million yuan in 2023 and loss of 1.53 billion yuan in 2022); on the other hand, the company's key projects such as Tiantanfu gradually entered a carry-over period, driving the steady operation of the real estate business to consolidate the basic market. However, relatively speaking, the company's performance forecast range is lower than our previous expectations (970 million yuan). We think it may be due to the effects of depreciation of projects outside Beijing. This is also a phenomenon that most housing enterprises will face in 2023. However, considering that the company's projects mainly focus on Beijing, we believe that the impact of impairment is relatively limited. The company is still a scarce housing enterprise with sufficient uncarried resources to guarantee future performance in the market.
Beijing has abundant resources, benefiting from the advancement of urban villages
According to data from the Central Index Institute, the company achieved sales of 45.4 billion yuan in 2023, +46% over the same period (based on the company's actual announcement). Equity sales ranked second in the Beijing market. This is the fourth year in a row that the company has entered the TOP5. The amount of land acquired by the company in 23 was 151 billion yuan, with a land acquisition intensity of 33%. Among them, it continued to acquire 2 parcels of land in Beijing, with a total land acquisition price of 11.4 billion yuan, with an equity ratio of 64%. The estimated value of goods was 16.5 billion yuan according to the government's guide price, which is expected to become an important source of sales in 2024. The company and Beijing Urban Construction Group have deep urban renewal resources in Beijing and have set up a special class to follow up the urban village renovation business. Recently, the pace of urban village renovation and implementation has accelerated, and the Guangzhou and Shenzhen plans are also of reference significance for Beijing.
We are optimistic that the company will seize the opportunity of urban village renovation and further expand the resources for high-quality projects in Beijing.
Repurchase cancellation commenced as scheduled, and the valuation after excluding financial assets was lower. In November 2023, the company announced that it changed the use of all initial share repurchases from “for sale” to “for cancellation and corresponding reduction of registered capital”. According to the January 30 announcement, the initial share repurchase will be cancelled on January 31, accounting for 4.51% of the total share capital, which is expected to significantly increase shareholders' equity. As of 23Q3, the book value of the company's financial assets reached 5.35 billion yuan. The latest market value on January 30 was 10 billion yuan. After excluding financial assets, it was only 4.7 billion yuan. Based on our estimated net profit of 23E/24E to mother of 68/1.4 billion yuan, the adjusted 23/24PE was only 6.9/3.4 times.
Risk warning: Beijing regional market risk, risk of shed reform and first-level development projects falling short of expectations, risk of performance fluctuations due to equity investment and minority shareholders' profit and loss ratio.