On March 21, 2024, the company announced its 2023 annual results: operating income of 3,569 million yuan, +55.8% year over year; net profit to mother was 467 million yuan, +89.0% year-on-year revenue met expectations, and net profit to mother exceeded expectations. The company's high revenue growth was basically in line with expectations, mainly due to the timely delivery and carry-over of the housing hardware business of the three projects, which brought in incremental revenue of about 684 million yuan. The growth rate of net profit to mother was higher than the revenue growth rate, mainly due to the high gross margin of the hardware business, which led to an increase in overall gross margin. The company's gross profit margin in 2023 was 28.1%, +4.7 pct.

The income structure is diverse and healthy. In 2023, the four major businesses of the company's community value-added services, non-owner value-added services, basic property management services, and commercial operation management accounted for 38.5%, 19.8%, 39.7%, and 2.0% respectively, compared with +17.7pct, -13.1pct, -5.6pct, and +1.0pct respectively in 2022. The share of revenue from community value-added services and commercial operation management services is on the rise, the share of revenue from value-added services for non-owners is declining, and the revenue structure is gradually improving.

Community value-added services and multiple businesses are developing rapidly. In 2023, the company's community value-added services achieved revenue of 1,375 billion yuan, +189.0% year-on-year. Among them, home beautification services, smart community services, home delivery services, and retail businesses performed well, achieving revenue of about 749 million yuan, 223 million yuan, 79 million yuan, and 76 million yuan respectively, with year-on-year increases of +984%, +88%, +59%, and +41%, respectively.

Actively give back to shareholders by paying special dividends. In 2023, the company paid a dividend of HK$0.26 per share (including a special dividend of HK$0.1 per share), with a dividend ratio of 71%, up 22pct from 2022. At the closing price on March 21, the dividend rate (including the special dividend) was as high as 8.3%, and the dividend rate (excluding the special dividend) still reached 5.1%.

The controlling shareholders' sales performance is good, laying the foundation for the company's future development. According to Kerui, in 2023, the company's controlling shareholder, C&D Real Estate had full-caliber sales of 189.06 billion yuan, a year-on-year increase of 11.0%, rising to 8th place among Crewe's top 100 real estate companies. In 2023, the company's operating area from related parties was 11.63 million square meters, +34.6% over the same period last year. The continuous and stable supply of C&D Real Estate projects has laid a high-quality foundation for the continuous growth of the company's subsequent management scale.

Due to the high settlement amount of the housing hardware business and rapid growth in the company's performance in 2023, we expect the company's net profit to be 510 million yuan, 680 million yuan, and 820 million yuan respectively in 2024-26, with year-on-year growth rates of +8.6%, +33.2%, and +21.1%, respectively. Maintaining a “buy” rating, the current price of the company's stock (closing price on March 21) corresponds to the 2024-26 PE valuation of 8.0x, 6.0x, and 4.9x.

C&D real estate sales fell short of expectations; economic recovery fell short of expectations; expansion fell short of expectations.