Incident: On January 30, 2024, Urban Construction Development issued an announcement regarding the cancellation of the initial share repurchase.
Cancelling repurchased shares to enhance shareholders' rights. The company reviewed and passed the “Proposal on the Company's Change of Use and Cancellation of the Initial Share Repurchase”, and decided to change the use of all initial repurchased shares from “for sale” to “for cancellation and corresponding reduction of registered capital.” As of January 30, 2024, the number of shares in the company's special account was 181 million shares, of which 102 million shares purchased for the first time will be cancelled on January 31, 2024. As of January 30, 2024, the total share capital of the company was 2,257 million shares. The 102 million shares cancelled this time accounted for 4.51% of the total share capital before cancellation. After cancellation, the total share capital of the company will be reduced to 2.55 billion shares.
On August 28, 2020, the company reviewed and passed the “Proposal on Repurchasing Shares through Centralized Bidding Transactions”. The initial repurchase was completed on November 13, 2020. The actual repurchase of 102 million shares, accounting for 4.51% of the company's total share capital. The average repurchase price was 5.89 yuan/share, with an actual repurchase amount of 600 million yuan. We believe that the company will change the purpose of repurchasing shares at the current valuation point, respond to market value management calls, actively protect shareholders' rights and interests, and increase the asset value per share, reflecting the company's responsibility and determination as a state-owned enterprise in Beijing.
The company expects to turn a loss into a profit in 2023. On January 30, 2024, the company issued a pre-profit announcement for the 2023 annual results. The company expects to achieve net profit of 470-704 million yuan in 2023, and realized deducted non-net profit of 412-617 million yuan, corresponding to the company's net loss of 926 million yuan and deducted non-net loss to mother of 502 million yuan in 2022. The main real estate business of the company continued to operate steadily. In 2023, changes in the stock prices of transactional financial assets held by the company and participating companies decreased compared to the same period in 2022, reducing the impact on the company's performance, and the company turned losses into profits.
Sales performance improved against the market, and the main business operated steadily. According to China Index data disclosure, in 2023, the company achieved full-caliber sales of 45.4 billion yuan, a year-on-year increase of 45.98%, and achieved a full-caliber sales area of 986,000 square meters, an increase of 53.34% over the previous year.
Investment advice: Targets related to the China-Thailand valuation have a “superior to the market” rating. We forecast that the company's EPS in 2023 and 2024 will be $0.30 and $0.47, respectively, and the company's net assets per share in 2023 and 2024 will be 11.57 yuan and 11.96 yuan, respectively. In the context of “Sino-Special Valuation”, the company's valuation is clearly undervalued.
Referring to comparable company valuations, we gave the company a PB valuation of 0.7-0.8 times in 2023, corresponding to a reasonable value range of 8.10-9.25 yuan per share. Give the company an “better than market” rating.
Risk warning: The carry-over of company-level land development and shed improvement projects falls short of expectations.