Introduction to this report:
The company continued to shrink in 2023, and gross margin was further bottomed out due to a brief period of pressure from the development business; in the future, the company will use high-quality development as a strategy, and it is expected that as housing disturbances decline, the non-development business will help the company's profits rise steadily.
Summary:
The company's 2023 performance is in line with expectations. While continuing to optimize its balance sheet, it is promoting multi-channel business development and maintaining an increase in holdings rating. In 2023, the company's revenue was 18.7 billion yuan (RMB, same below), and net profit to mother was 12.9 billion yuan, down 28% and 47%, respectively. Among them, the development business was the main business accounting for 86% of revenue. Affected by the industry, revenue fell 31% year on year to 155.9 billion yuan. Considering that the industry is still in the recovery period, the 2024-2025 EPS was adjusted to 1.93 yuan, 1.97 yuan (originally 1.96 yuan, 2.06 yuan), and the 2026 EPS was added to 2.07 yuan, maintaining the shareholding rating.
The company continued to shrink in 2023, and gross margins bottomed out. After the company entered the downsizing phase in 2022, the company's total assets fell further 11% to 704 billion yuan in 2023. The downsizing situation continued, and brought about an optimization of the balance and liability structure. The company expects a completed area of 15 million square meters in 2024, and the company's sold but unsettled contract sales area of 12.6 million square meters by the end of 2023, corresponding to sales of 173.4 billion yuan, which is expected to support subsequent performance releases.
The company's gross margin fell by 4 pct to 17% in 2023, essentially because the gross margin of the development business fell 7 pct to 11% year on year. Expectations are related to market pressure and project layout. However, with the gradual recovery of the commercial housing market, combined with the steady improvement of non-development businesses, gross margin has basically bottomed out. In addition, the company's land acquisition investment in 2023 still chose to focus on tier-1 and second-tier core cities, adding 3.68 million square meters of land reserves for the whole of 2023, a year-on-year decrease of 18%. By the end of 2023, the company's total land reserves were 45.39 million square meters, and the equity ratio increased slightly by 2 pct to 71%.
The company will take advantage of its rich commercial assets to seek better loans. The company attaches importance to financial security. At the end of 2023, interest-bearing debt fell 7% year on year, of which 77% was bank financing. Subsequent companies will give full play to the advantages of large commercial projects, further increase the financing of operating property loans, and seek loans with lower costs and longer terms.
The gross profit contribution of non-development businesses reached 44%, and will be an important guarantee for the company's profit stabilization in the future. Operating revenue in 2023 rose 9% year on year to 12.9 billion yuan (excluding tax, same below), of which 77% of revenue came from shopping malls including the two major product lines of Tianjie and Xingyuehui. In particular, with the gradual recovery of the consumer market, the mall's annual sales and average daily passenger flow rose 30% and 28% year over year, respectively. The occupancy rate increased by 4 pcts to 96% year on year, resulting in a 10% year-on-year increase in rental income; service revenue increased 2% year over year to 11.9 billion yuan, and gross margin increased by 2 pct to 31%.
Risk warning: The decline in demand exceeded expectations, and the development of other transformation businesses fell short of expectations.