Incident: In 2023, the company achieved operating income of 15.627 billion yuan, +20% year over year; net profit to mother of 736 million yuan, +23.96% year over year; basic earnings per share of 0.69 yuan, +23.98%; the company plans to distribute a cash dividend of 1.7 yuan for every 10 shares to all shareholders.
High quality growth in performance, outstanding business performance
On the revenue side, the company achieved revenue of 15.627 billion yuan in 2023, an increase of 20% over the previous year. Among them, 1) the property management business achieved revenue of 14.758 billion yuan, an increase of 18.03% over the previous year, mainly due to the growth of original property management projects and the increase in new development projects, accounting for 94.4% of revenue; 2) the asset management business achieved operating income of 698 million yuan, an increase of 50.13% year on year, mainly due to rent reduction in the same period in '22 without this incident and the expansion of the management business scale, accounting for 4.5% of revenue;
Looking at the breakdown, basic properties, platform added value, and professional value-added services achieved revenue of 12.113 billion yuan, 5.84 billion yuan, and 2,061 billion yuan respectively, up 20.44%, 1.42%, and 10.19% year-on-year respectively, accounting for 77.5%, 3.7%, and 13.2% of revenue respectively.
On the profit side, in 2023, the company achieved net profit of 736 million yuan, an increase of 23.96% over the previous year; net profit after deducting non-return to mother was 660 million yuan, an increase of 32.12% over the previous year. Among them, China Merchants Property achieved net profit of 384 million yuan in 23, an increase of 0.32% year on year; China Airlines Property achieved net profit of 118 million yuan, a year-on-year decrease of 48.16%. The company's gross profit margin in 2023 was 11.56%, down 0.28 pct from '22; among them, 1) gross margins of basic property, platform value added, and professional services in the property management business were 8.76%, 8.49%, and 17.81%, respectively, and -1.02, +2.46, and +1.51pct, respectively; 2) gross margins of commercial operation, holding property rental, and operating in the asset management business were 44.13% and 54.32% respectively, compared with '22. Non-traditional businesses effectively hedge against declining gross margin of basic property management.
Outreach capabilities have been further improved, and the prospects for major shareholders to “protect” are good
On the scale side, by the end of 2023, the company's projects covered 156 cities across the country, with 2,101 projects under management, an increase of 217 over 2012; the management area reached 345 million square meters, an increase of 10.9% over the previous year; of these, the non-residential management area reached 213 million square meters, accounting for 61.90%. By city, Shenzhen City, Guangdong Province (excluding Shenzhen), Jiangsu Province, Shanghai, and Sichuan Province ranked in the top five, with a total management area of 186 million square meters, accounting for 54% of the total management area. The density of projects in advantageous regions has effectively increased. At the same time, two new regions, Inner Mongolia and Tibet, have been opened up to continue to improve the national layout.
The controlling shareholder, China Merchants Shekou, achieved a total contracted sales area of 12 million square meters in 23 years. In the future, it will provide continuous support for the company's management scale growth and diversified business collaboration.
On the expansion side, in 2023, the company achieved an annual contract amount of 4,044 billion yuan, an increase of 22% over the previous year; of these, new contract amounts to 3,539 billion yuan for third-party projects (accounting for more than half of projects above 10 million level), an increase of 27.44% over the previous year, and the third-party expansion capacity is strong. The company signed a new annual contract amount of 3.459 billion yuan for the non-residential business, accounting for 85.56%. The expansion of several sub-tracks accelerated. The amount of new annual contracts signed by finance and universities increased by 67% and 31%, respectively. At the same time, it continued to participate deeply in urban services and expanded service projects in Shenzhen and Sanya. The merger and acquisition unit integration has achieved remarkable results. The total annual contract amount for the four mergers and acquisitions companies signed new projects in '23 was 193 million yuan.
The scale of commercial management was expanded, and the operation of owned properties was steady
In terms of asset management business, 1) Commercial operations: As of the end of '23, China Merchants Management was managing 70 commercial projects (including preparatory projects), with a management area of 3.97 million square meters, including 3 self-owned projects and 58 projects managed by China Merchants Shekou (Hangzhou Linping Garden City, Chengdu Jinniu Investment Garden City, Ganzhou China Merchants Center, etc.), 9 third-party brand export projects, and continuous improvement of commercial management capabilities. 2) Owns property rental business: including hotels, shopping centers, sporadic businesses, office buildings, etc., with a total leasable area of 469,200 square meters at the end of 23, with a occupancy rate of 96%.
The company adjusted its leasing strategy in a timely manner according to the rental market conditions to achieve a steady increase in rental income.
Investment advice: The company is backed by two major state-owned enterprises, China Merchants Group and China Aviation Group. The scale has expanded rapidly in 23 years, the market expansion has made multi-dimensional efforts, and the performance of value-added services is steady. Considering the intense competition in the industry and profit margin pressure, we adjusted the company's net profit to mother for 24-25 to be 858 billion yuan and 1,011 million yuan (original value 9.32 billion yuan and 1,139 million yuan), and forecast net profit to be 1,223 billion yuan for 26 years, corresponding EPS of 0.81, 0.95, 1.15, and corresponding PE of 13.54X, 11.48X, and 9.49X, respectively, to maintain a “buy” rating.
Risk warning: Market uncertainty increases risk, industry competition increases risk, innovative business incubation risk
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