Brief performance review
On March 14, 2024, the company announced its 2023 annual results: achieved revenue of 77.8 billion yuan in 2023, +28.2% year over year; realized net profit of 5.89 billion yuan, turning a year-on-year loss into profit (net loss of 1.40 billion yuan in 2022); and achieved adjusted net profit of 9.80 billion yuan, +244.7% year-on-year.
Management analysis
The stock housing and new housing business outperformed the market. In 2023, the company's new housing GTV was 103 billion yuan, +6.7% year-on-year; GTV of existing housing was 2028 billion yuan, +28.6% year-on-year. Corresponding to the company's net revenue from the new housing business was 30.6 billion yuan, +6.7% year on year; net revenue from the stock housing business was 28 billion yuan, +15.9% year over year. The “integrated” business stopped falling and rebounded from 2022, mainly due to: ① the effects of the policy have eased and the second-hand housing market has recovered; ② the coverage of new housing cooperation projects has increased; ③ the company's strategic expansion, the number of stores and agents has increased, and human efficiency and store efficiency have improved, which has led to an increase in market penetration rate and sales elimination rate.
The home improvement and home furnishing business is developing rapidly, creating a second growth curve. The contract amount for the home improvement and home furnishing business in 2023 was 13.3 billion yuan, +146% year over year (+93% year over year if Shengdu were combined in 2022); revenue was 10.85 billion yuan, +115.0% year over year. The rapid development of this business is mainly due to: ① the increased synergy of customer acquisition and conversion between the two major businesses of real estate transactions and home improvement, which led to an increase in the number of orders in the business; ② the increase in the contribution of custom furniture, soft decoration and appliances; ③ the increase in delivery capacity, and the average construction period dropped to 111 days in 2023.
At the same time, 11 cities achieved positive operating profits throughout the year, and the company has basically passed the home improvement business model. The business performance continues to improve, and it has become the second growth curve in the company's performance.
Continue to implement repurchases and dividends, and actively give back to shareholders. For the full year of 2023, the company spent approximately US$719 million to repurchase 46.7 million ADS shares and cancel them all, accounting for 3.7% of the total number of shares issued by the company before the repurchase program began. In September 2023, the company paid a special cash dividend of about 200 million US dollars. On this basis, the company announced that it would pay a final dividend of about 400 million US dollars, corresponding to the company's adjusted net profit of about 1.36 billion US dollars, with a dividend rate of about 44.0% for the whole year.
Profit Forecasts, Valuations, and Ratings
Considering that the company's revenue and profit performance are basically in line with expectations, we expect the company's non-GAAP net profit for 2024-2026 to be 10.79 billion yuan, 10.96 billion yuan, and 11.62 billion yuan respectively, with year-on-year growth rates of +10.2%, +1.6%, and +6.0%, respectively. As of March 14, 2024, the closing price of the company's stock was 12.1x, 11.9x, and 11.2x, respectively, corresponding to the 2024-26 PE valuation (corresponding non-GAAP net profit), maintaining a “buy” rating.
Risk warning
The recovery in real estate sales fell short of expectations; the risk of negative public opinion erupted; and rates continued to be lowered.