Core net profit in '23 was -50% year-on-year, in line with expectations, and the operation and service business contributed more than 60% to the performance. The company's revenue in '23 was 1807 billion yuan, -27.9%; net profit to mother was 12.85 billion yuan, -47.3%; core net profit was 11.35 billion yuan, -49.6% year-on-year, in line with the scope of the pre-reduction in previous performance. Among them, the operation and service business contributed more than 60%, and the company plans to continue to increase this share; basic income per share was 2.07 yuan, or -49.4% year on year. Real estate settlement revenue was 155.9 billion yuan, -31.3% year-on-year; real estate settlement area was 10.71 million square meters, -31.0% year-on-year. Gross profit margin, net interest rate to mother, and core net interest rate were 16.9%, 7.1%, and 6.3%, respectively, -4.2pct, -2.6pct, and -2.7pct; real estate settlement gross profit margin 11.0%, -6.9pct year on year; three-fee rate was 6.0%, +1.1 pct year on year, of which sales and management rates were +0.8 pct and +0.3 pct year on year; investment income of 1.55 billion yuan, +9.2% year on year; IP fair value liabilities changed by 2.01 billion yuan, -30.3% year on year; contract 1,028 100 million yuan, -17.9% year-on-year, covering 0.66 times real estate settlement revenue in 23 years. In '23, the company calculated an inventory impairment reserve of 1.01 billion yuan. In addition, it is planned to pay a total dividend of 0.55 yuan per share for the whole year. The corresponding dividend ratio accounts for 32% of core net profit, corresponding to the 23A dividend rate of 6%.
In '23, sales were 173.5 billion yuan, -14% year over year, land acquisition ratio was 21%, and the focus was on core cities. The sales amount for 23 years was 173.5 billion yuan, -13.9% year over year; sales area was 10.8 million square meters, -17.3% year over year; average sales price was 161,000 yuan/square meter, +4.0% year on year.
In '23, the company's land acquisition was generally cautious, with a land acquisition area of 3.68 million square meters, -17.9%, and a land acquisition/sales area ratio of 34%; the land acquisition amount was 36.6 billion yuan, -24.3% year over year; the equity ratio was 71%, +8pct year on year, and the land acquisition/sales ratio was 21%; the average land acquisition/sales price ratio was 62%, and the focus on land acquisition returned to core cities such as Shanghai and Guangzhou. At the end of '23, the company's total land storage was 45.39 million square meters, with an equity ratio of 71%, of which the first and second tier accounted for 75%; the average land storage cost was 4,705 yuan/square meter, accounting for 29% of the average sales price during the same period; excluding 12.6 million square meters of unsold area, corresponding to 32.79 million square meters of saleable area, covering 3.0 times the sales area in '23. The completed area was 16 million square meters in '23, -20.0% year on year; 15 million square meters were planned to be completed in '24, -6.3% YoY.
Shopping malls grew steadily, long-term leasing matured, and property management strengthened. Diversified business revenue was 24.9 billion yuan, +6% over the same period last year. The company's IP revenue in '23 was 12.9 billion yuan, +8.9% year over year; gross profit margin was 75.9%, +0.3 pct year on year. 1) In terms of shopping malls, 32 cities had a layout at the end of 23, of which 141 were in operation (including 31 light assets), of which 5 were added in 23; 88 were opened (including 11 asset-light), GRA797, +10.4%, located in 20 cities; occupancy rate 96.2%, +2.3 pct year over year, +0.8 pct compared to the end of 23H1; GFA 10.28 million square meters, +10.9% year-on-year; 12 new buildings were opened in '23, including 7 light assets. In '23, we achieved rent of 10.28 billion yuan, +9.0% year on year, -5% year on year; shopping mall sales of 63.2 billion yuan, +49.4% year over year, +30% year on year; average daily customer flow of 2.63 million, +31.5% year over year, same store +28%; 14 new buildings are expected to be opened in '24 (including 6 with light assets), and a total of 102 units are expected to open at the end of '24, GRA951 10,000 ping, +19% year over year. 2) In terms of rental housing, Guanyu has opened 123,000 units, with an overall occupancy rate of 95.5%, +7.0 pct year over year, and +1.8 pct compared to the end of 23H1. Among them, the occupancy rate for projects that have been in operation for more than six months is 96.4%, +5.3 pct year over year; rent is 2.93 billion yuan, +13% year over year. 3) In terms of property management, Longhu Zhichuang's revenue in '23 was 11.94 billion yuan, +2.4% year on year; management area was 360 million square meters; gross profit margin was 30.6%, -3.7 pct year on year. Overall, the company's operating service revenue was 24.9 billion yuan, +5.6% year-on-year.
Operating cash flow was positive in '23, reaching 3.5 billion yuan. In a difficult financial situation, additional financing is invaluable. At the end of '23, the company was in the three red lines, with a pre-debt ratio of 60.4%, a net debt ratio of 57.2%, and 1.36 times the short-term cash debt ratio; financing costs were 4.24% lower than at the end of '22, +14BP; and the interest-bearing debt period was 7.85 years, leading the industry. The company's operating cash flow was positive in '23, reaching 3.5 billion yuan. The company's overseas ratings are BBB- (Standard & Poor's), Ba1 (Moody's), and BBB- (Fitch). The balance of the company's foreign bonds matured one after another in 2027-2032; the balance of domestic bonds in 2024 was 6 billion yuan. In 2023, the company successfully issued 2.3 billion yuan/ 3.5-3.7% /3 years.
Investment analysis opinion: Diversified businesses are growing steadily, profit structure is optimized, and “buy” rating is maintained. As one of the industry leaders, Longhu Group has established a trustworthy market image over the past 30 years; we believe that the company will continue to move forward steadily with the four major characteristics of strategic foresight, fine operation, financial stability, and deep urban cultivation. At the same time, the company plans to shift gears and accelerate its diversified business of shopping malls, long-term leasing, and property management, and recurring revenue will increase accordingly. Considering the pressure on real estate sales, but the company's operations and services will steadily contribute to some performance, we lowered the company's 24-25 performance forecasts to 129/13.2 billion yuan (originally 249/25.8 billion yuan), respectively, and introduced 26 billion yuan to 13.6 billion yuan; the current price corresponds to the 24-year PE only 4.9X. We are still optimistic about the company's steady growth and maintain a “buy” rating.
Risk warning: Real estate regulation exceeded expectations and tightened, sales removal rate fell short of expectations, consumption recovery fell short of expectations, etc.