Introduction to this report:
The company expects net profit to fall by 45% to 50% year-on-year in 2023, mainly due to the decline in development business revenue and gross margin. It is expected that as housing disturbances decline, the non-residential business will help the company's performance recover steadily.
Summary:
The company issued a performance forecast. It is estimated that net profit due to mother will drop 45% to 50% year-on-year in 2023 to 122 to 13.4 billion yuan, maintaining an increase in holdings rating. Affected by industry pressure in 2023, the company's performance weakened. It is expected that with the decline in residential disturbances, a more stable non-residential business type will drive the company's operations to stabilize, which in turn will lead to a steady recovery in performance. Therefore, the company's 2023-2025 performance growth rate was adjusted to -46.8%, 2.2%, and 5.1%, and the company's 2023-2025 EPS was adjusted to 1.92 yuan, 1.96 yuan, and 2.06 yuan (originally 4.05 yuan, 4.33 yuan, 4.81 yuan) to maintain an increase rating.
The development business is facing downward pressure on settlement revenue and gross margin, and this is the root cause of weakening performance in 2023. The overall performance of the company's development business in 2023 was a decline in sales scale and price pressure: the company's contract sales area for the year was 10.8 million square meters and sales volume of 173.5 billion yuan (RMB, same below), down 17% and 14% year on year, respectively; the average sales price was 16070 yuan/square meter, which is low compared to the average price for 2018 to 2022. Furthermore, in recent years, the company's land acquisition has gradually focused on Tier 1 and 2 core cities, and the leverage ratio for related projects is low. It is expected that as the above projects gradually enter the settlement stage, it will put pressure on the gross margin to decline.
Continuing to deepen business adjustments, operating and service revenue in 2023 rose 6% year on year to 24.9 billion yuan, and the revenue dependency on development business gradually decreased. The company emphasizes the collaborative development of multiple channels, and the contribution of non-development businesses to performance increased. Specifically, operating business revenue in 2023 was 12.9 billion yuan (excluding tax, same below), and service business revenue was 11.9 billion yuan. Total revenue increased 6% year over year.
Continued implementation of a prudent debt management model is expected to benefit from the gradual advancement of real estate financing support policies. In terms of debt management, the company chose to actively reduce the size of debt and optimize the debt structure. For example, on March 8, the company paid a special commercial asset support plan with a total scale of about 4.6 billion yuan in advance. In addition, the company holds a large number of high-quality commercial assets, represented by the Tianjie series. Under the new operating property loan management policy, it is expected to receive more financial support to supplement liquidity.
Risk warning: The decline in demand exceeded expectations, and the development of other transformation businesses fell short of expectations.