23FY: Development performance was under pressure, and the operating business showed resilience; maintaining the 23FY performance released by the “buying” company: Affected by the downturn in the real estate industry, development business revenue and profit margins declined simultaneously, dragging down the company's overall revenue -28% year over year to 1807 billion yuan, and the core net profit ratio was -49% to 11.4 billion yuan. Considering the impact of the decline in new home sales on the development business, we adjusted our revenue and gross margin assumptions and adjusted the 24-26E EPS forecast to 1.95/2.10/2.18 (24-25E previous value: 3.41/3.72). Comparable to the company's 24E PE average value is 6.6 times (Wind agreed). Considering the company's long-term steady operating capability and forward-looking operating business layout, we believe that the company's reasonable 24E PE is 7.3 times, adjusted the target price to 15.46 HKD (previous value: HK$25.12), and maintained a “buy” rating.

Under high sales payback, operating cash achieved a net inflow. The company's contract sales volume for 23 years was -14% to 173.5 billion yuan. Although there was a decline, the sales equity ratio was +3pct to 66% year over year, and the repayment rate exceeded 100%, achieving a net operating cash inflow of 3.5 billion yuan. The company's land acquisition side is relatively cautious. The equity acquisition intensity in 23 years was -1 pct to 23% year-on-year. By the end of '23, the company had 45.39 million square meters of land storage. Based on the value of goods, about 77% was located in Tier 1 and 2 cities, with a land storage coverage ratio of 3.5 times. The company plans to promote 240 billion dollars within 24 years. Although the same ratio is -23%, considering that the stock is relatively abundant, subsequent companies can invest additional investment according to capital conditions and market changes to maintain supply flexibility.

The operating business is growing steadily, building a basic market for the company's performance

In 2023, the company's operating business achieved steady growth, with operating business revenue +9% YoY to 12.9 billion, service and other business revenue +2% YoY to 11.9 billion, accounting for more than 60% of profit. At the operational level, 1) Commercial investment: Rental income +9%, occupancy rate 96%, +2pct year over year. The number of operators has reached 88, and the total operating floor area is 7.97 million square meters, +10% compared to the same period last year. The company plans to open 14 projects in '24 to support further growth in rental income. 2) Long-term rental apartments: The number of opened rooms reached 123,000, +6% year-on-year, and the occupancy rate was +7pct to 95.5% year-on-year. 3) Property management: The area under management reached 360 million square meters at the end of the period, +13% compared with the same period. We expect that the company's operating business performance will continue to be resilient to hedge against the impact of the decline in development business on the company's performance.

The scale of interest-bearing debt declined, and sufficient financing space increased the financial security margin of the company's interest-bearing debt balance at the end of the period of 192.6 billion, of which the remaining debt within 24 years accounted for 8% (as of March 22), the balance of domestic corporate bonds to be repaid within 24 years was only 6 billion, and there were no overseas public bonds due before the end of '26. In addition, the company's financing channels remain open, and it has sufficient financing amounts. There are still 35.7 billion dollars in corporate bonds and medium-term notes, and a bank loan credit limit of 200 billion + billion dollars. By the end of '23, the company's operating property loan balance was 47.4 billion yuan; since the beginning of the year, with policy support, operating property loan replacements for stock projects had increased by more than 11 billion dollars. There is still plenty of room for financing in the future, increasing the company's financial security margin. The company's 23-year average borrowing cost is 4.24%, which remains low in the industry.

Risk warning: The downturn in the industry weakens the company's ability to finance; the growth rate of property sales falls short of expectations; the development of operational business falls short of expectations.