Core views
In 2023, the company achieved revenue of 1807 billion yuan, a year-on-year decrease of 27.9%, achieved net profit of 12.9 billion yuan, a year-on-year decrease of 47.2%, and achieved core net profit of 11.4 billion yuan, a year-on-year decrease of 49.6%, in line with the guidelines given in the previous performance forecast. The company's operating business achieved steady growth, accounting for 13.7% of revenue in 2023, an increase of 4.3 percentage points over the previous year, and the revenue structure continued to be optimized. In 2023, the company achieved sales volume of 173.5 billion yuan, a year-on-year decrease of 13.9%, accounting for 95% of first-tier and second-tier sales, and insisted on focusing on core cities. By the end of 2023, the company's total land storage was 43.59 million square meters, of which 72% were located in Tier 1 and 2 cities, with excellent soil storage quality. By the end of 2023, the company's “three red lines” were in the green zone. Short-term and medium-term interest-bearing debt accounted for only 13.9%, and the balance of open bonds during the year was only 6 billion yuan. No overseas public bonds matured until 2027, and the financial situation remained stable.
occurrences
The company announced its 2023 annual results. In 2023, it achieved revenue of 18.7 billion yuan, a year-on-year decrease of 27.9%, realized net profit of 12.9 billion yuan, a year-on-year decrease of 47.2%, and achieved core net profit of 11.4 billion yuan, a year-on-year decrease of 49.6%.
Brief review
The company's performance was in line with expectations. In 2023, the company achieved revenue of 1807 billion yuan, a year-on-year decrease of 27.9%, achieved net profit of 12.9 billion yuan, a year-on-year decrease of 47.2%, and achieved core net profit of 11.4 billion yuan, a year-on-year decrease of 49.6%, in line with previous performance forecasts. The decline in the company's performance was mainly due to the decline in development business settlement revenue and gross margin due to the downturn in the real estate industry. In 2023, the development business achieved revenue of 155.9 billion yuan, a year-on-year decrease of 31.3%, and a gross profit margin of 11.0%, down 6.9 percentage points from the previous year.
The revenue structure continues to be optimized. The company's operating business achieved steady growth. In 2023, the operating business achieved revenue of 12.9 billion yuan, a year-on-year increase of 8.4%, a gross profit margin of 75.9%, an increase of 0.3 percentage points over the previous year, and the service business achieved revenue of 11.9 billion yuan, an increase of 1.7% year-on-year, and a gross profit margin of 31.0%, an increase of 1.1 percentage points over the previous year. The share of operating businesses in revenue continued to increase, accounting for 13.7% in 2023, an increase of 4.3 percentage points over the previous year, and the revenue structure continued to be optimized. Meanwhile, operating businesses accounted for more than 60% of the core net profit to mother, accounting for more than half for the first time.
Focusing on core cities, the quality of soil storage is excellent. In 2023, the company achieved sales volume of 173.5 billion yuan, a year-on-year decrease of 13.9%, and achieved a sales area of 108 billion yuan, a year-on-year decrease of 17.3%.
The company insists on focusing on core cities, accounting for 95% of first-tier and second-tier sales. The company ranked in the top 3 in 7 cities and the top 5 in 14 cities. The company's product strength was recognized by the market. In 2023, 35 new projects were opened, and the average elimination rate for that year was nearly 70%. In terms of land acquisition, the amount of land acquired in 2023 was 35.9 billion yuan, and the intensity of land acquisition was 20.7%, down 2.6 percentage points from the previous year. By the end of 2023, the company's total land storage was 43.59 million square meters, of which 72% were located in Tier 1 and 2 cities, with excellent soil storage quality.
The company's finances remain stable. By the end of 2023, the company had a withheld balance ratio of 60%, a net debt ratio of 56%, and a short-term cash debt ratio of 2.3. The “three red lines” were in the green position. The company's interest-bearing debt is 192.6 billion yuan, with an average contract loan period of 7.9 years. Short-term debt accounts for only 13.9%, and the debt structure is reasonable. As of March 22, 2023, the balance of the company's public bonds during the year was only 6 billion yuan. There were no overseas public bonds due before 2027, and the financial situation remained stable.
Lower the profit forecast and keep the purchase rating and target price unchanged. Due to the increase in the company's share capital due to interest in shares, the company's core EPS for 2024-2026 was lowered to $1.71/1.80/1.97 (the original forecast was $1.78/1.88 for 2024-2025), and the purchase evaluation target price remained unchanged at HK$15.2.
Risk warning: 1) In terms of performance, the real estate market is currently still at the bottom, and there is some depreciation pressure on the company's property development inventory, which may have a certain impact on future performance; 2) On the business side, buyers' expectations have not been fundamentally improved, and there may be limited room for future housing price increases. The subsequent sales price of the land the company obtained at a higher price in the early stages may fall short of expectations, which in turn puts some pressure on the company's future settlement and performance transformation; 3) The operating service business is becoming more important to the company, and its growth comes from a recovery in consumption if consumption does not recover It will have a certain impact on the company's performance growth.