Revenue is under pressure, and the overall financial situation is improving. In 2023, the company achieved operating income of 18.74 billion yuan, a year-on-year decrease of 27.9%, and achieved net profit of 12.85 billion yuan, a year-on-year decrease of 47.3%. After excluding the effects of changes in fair value, core net profit decreased by 49.6% year-on-year to 11.35 billion yuan. Gross profit of 30.58 billion yuan, gross margin was 16.9%. The profit margin after core tax was 8.7%, -3.6 pp year on year, and the profit margin after core equity was 6.3%, -2.7 pp year on year. The overall financial stability and improvement. The company's short-term cash debt ratio was 1.96, the net debt ratio fell 2.2 percentage points year on year to 55.9%, the balance ratio excluding advance accounts receivable was 60.4%, and the short-term cash debt ratio after excluding pre-sale supervision funds and restricted funds was 1.36, maintaining the “green file” level. At the same time, the debt structure was optimized, and the average loan period was 7.85 years. Comprehensive loans at the end of 2023 were 192.65 billion yuan, down 7.4% year on year. The average borrowing cost was 4.24% per annum, and cash in hand was 60.42 billion yuan.

Focus on the core area, with sufficient soil storage resources. In 2023, the company's development business achieved revenue of 155.86 billion yuan, a total construction area of 10.708 million square meters of delivered properties, and a gross settlement margin of 11.0%. The contract sales amount was 173.49 billion yuan, corresponding to a sales area of 10.796 million square meters, the unit price was 16070 yuan/square meter, and the outstanding amount sold at the end of the period was 173.4 billion yuan, with an area of about 12.6 million square meters. The company's layout focuses on core regions, with contract sales in the Yangtze River Delta, Western China, Bohai Rim, South China and Central China regions, accounting for 28.9%, 28.4%, 21.8%, 11.8% and 9.1%, respectively. Furthermore, there are sufficient land reserves. The total construction area of the newly acquired land reserves in 2023 is 3.68 million square meters, and the equity area is 2.66 million square meters. The total land storage at the end of the period was 45.39 million square meters, and the equity area was 32.36 million square meters. The average cost was 4,705 yuan per square meter, or 29.3% of the current contract unit price.

The operating business is steady, and the profit contribution is significant. In 2023, the company's operating business achieved a year-on-year increase of 8.9% in rental revenue to 12.94 billion yuan, with shopping malls, rental housing and others accounting for 77.4%, 19.7%, and 2.9% respectively. At the end of 2023, the shopping mall had a construction area of 7.97 million square meters, including parking spaces, with a total floor space of 10.28 million square meters, and an overall occupancy rate of 96.2%. In 2023, 12 new shopping malls were opened, 7 of which were asset-light. Same-store sales and passenger flow both increased by more than 30% compared to last year, and rental revenue was +9% to 10.28 billion yuan. In terms of rental housing, Guanyu has opened 123,000 units, with an overall occupancy rate of 95.5%. Among them, the occupancy rate for projects that have been in operation for more than six months is 96.4%, and revenue is +6% to 2.55 billion yuan. In addition, the service business achieved revenue of 11.94 billion yuan, an increase of 2.4% over the previous year, and the property under management area of 360 million square meters at the end of the period. The operating and service business contributed more than 60% of the profit after contributing core equity.

Profit forecast and rating: Net profit to mother will maintain a compound growth rate of 4.0% in 2024-2026. Considering the steady growth of the company's operating business, it has many high-quality commercial assets, which can contribute to steady cash flow and maintain a “holding” rating.

Risk warning: Risks such as sales falling short of expectations, profit margins falling short of expectations, and business development falling short of expectations.