Event: The company announced 2023Q4 and annual results. 2023Q4 achieved revenue of 20.6% YoY (77.8 billion yuan, +28.2% YoY); net profit of 670 million yuan, +80.2% YoY (full year 5.89 billion yuan, year-on-year loss turned into profit); non-GAAP adjusted net profit of 17.01 billion yuan, +10.8% YoY (9.80 billion yuan, +244.6% YoY); GTV achieved 735.6 billion yuan, +13.7% YoY (3142.9 billion YoY, +20.4% YoY).
The policy promoted the recovery of the stock housing market, and revenue increased with GTV. The company's 2023Q4 revenue increased 20.6% year over year to 20.2 billion yuan, and GTV increased 13.7% year over year to 735.6 billion yuan. By business: ① Stock housing business revenue of 6 billion yuan (yoy +14.6%), mainly due to real estate demand-side policies continuously driving the recovery of the stock housing transaction market since the second half of 2023, 2023Q4 stock housing GTV increased 30.1% year-on-year to 468.1 billion yuan; ② New housing business revenue of 7.6 billion yuan (yoy -8.5%), mainly due to the year-on-year decrease of 9.7% in the new housing business GTV to 238 billion yuan during the same period, but the new housing rate (revenue/GTV) increased to 3.2% (yoy+0.1pct); ③ Home improvement The revenue from the home furnishing business was 3.6 billion yuan (yoy +73.9%), mainly due to continuous synergy with the transformation of the housing transaction business in the customer acquisition process and the increase in the contribution of new retail businesses such as custom furniture; ④ Emerging businesses and other net revenue of 2.9 billion yuan (+169.3% year over year), mainly due to an increase in the number of rental properties.
The home improvement and home furnishing business and the development business are expected to become the company's second growth pole. 2023Q4's home improvement and home furnishing business revenue increased 73.9%, mainly due to continuous synergy with the transformation of the housing transaction business; the year-on-year increase of 169.3% in emerging business was mainly due to the increase in the number of rental properties under the worry-free rental model, which led to an increase in net revenue from rental housing management and operation services. The company's management scale expanded from 70,000 units at the end of 2022 to 200,000+ units at the end of 2023. At the same time, asset operation efficiency also remained at a high level. The carefree rental rate further increased to 95.1% from the end of 2022 (yoy+ 6.0 pct). The company's home improvement and home furnishing business and development business are growing rapidly and are expected to become the company's second growth pole.
Gross margin increased to 25.5% year over year, and adjusted net profit increased 10.8% year over year. The company achieved gross profit of 5.1 billion yuan (yoy +25.7%) in 2023Q4, achieving a gross profit margin of 25.5% (yoy+1.1 pct). The increase in gross margin was mainly due to an increase in revenue from the stock housing business and a reduction in fixed remuneration costs for chain agents, leading to an increase in the profit margin contributing to the stock housing business. The company's 2023Q4 operating profit margin was -0.9% (yoy-3.2pct), mainly due to a year-on-year increase of 43.5% of total expenses to 5.3 billion yuan. However, management stated at the performance meeting that the increase in expenses was mostly a one-time impact of one-time management/R&D/sales bonus payments. The company achieved adjusted net profit of 17.1 billion yuan in 2023Q4, an increase of 10.8% over the previous year.
Stores/brokers continue to expand, energy efficiency continues to improve, and maintain impressive shareholder returns. By the end of 2023, the company had a cumulative total of 4,3817 stores (yoy +8.1%), of which the number of active stores was 42021 (yoy +12.2%), with active stores accounting for 95.9% (yoy+3.5pct), and store efficiency reached a new level; by the end of 2023, the number of agents was 427,656 (yoy +8.5%), with active agents accounting for 92.9% (yoy+4.2pct), personnel energy efficiency Continually improving. In addition, the company repurchased and cancelled 3.7% of its share capital in 2023, paid a special cash dividend of approximately US$200 million in Q3 of 2023, and declared a year-end cash dividend of US$400 million.
Profit forecasting and valuation. The company's GTV has driven a high increase in revenue. The second growth curve has been shown. The scale continues to expand and maintain a considerable shareholder return. We expect the company's net profit to be 6.27 billion yuan, 6.76 billion yuan, and 7.41 billion yuan respectively in 2024-2026, with year-on-year growth rates of +6.5%, +7.9%, and +9.6%, respectively.
The corresponding PE is 21.9x, 20.4x, and 18.6x respectively. It was covered for the first time, and a “recommended” rating was given.
Risk warning: The popularity of housing stock is unsustainable, the recovery of new housing transactions is lower than expected, and the scale expansion is not smooth.