Revenue growth was significant, and cash and debt conditions were good. In 2023, the company achieved operating income of 134.43 billion yuan, up 34.9% year on year; net profit to mother was 5.03 billion yuan, up 2.0% year on year; gross profit margin fell from 15.3% to 11.1%, mainly due to a significant decline in the real estate market, gross margin of some delivered projects fell and recorded carry-over revenue; profit per share was 2.61 yuan, paying a final dividend of HK$1.3 per share. The dividend rate increased 6 percentage points year on year to 52% year on year, and the dividend rate was about 10%.

The company has sufficient cash flow. In 2023, it achieved a cash repayment amount of 184.3 billion yuan for property development, increasing the repayment ratio by 2 percentage points to 98%. Bank and cash on hand reached $54.16 billion at the end of the period. The three red lines remained at the green level. The debt-to-equity ratio decreased by 22.7 percentage points to 93.2%, the net debt-to-equity ratio decreased by 19 percentage points to 33.6%, and the average financing cost of existing interest-bearing debt decreased by 58BP to 3.75% year on year.

Deeply cultivate key cities, and develop business steadily. In 2023, the company's property development business revenue was 13.13 billion yuan, up 34.6% year-on-year, accounting for 96.8% of total revenue. The total construction area of properties delivered during the period was 8.52 million square meters, an increase of 3.88 million square meters over the previous year; equity sales reached 137.96 billion yuan, and the total equity sales floor area was 6.664 million square meters, up 13.5% and 9.3%, respectively. The company focuses on the layout of the three major urban clusters and adheres to the strategy of deepening cultivation in key cities. TOP5 city contracts account for more than 45% of sales, and TOP10 city contract sales account for more than 65%. In terms of land reserves, 78 new land plots were added throughout the year. The amount of full-caliber land acquisition increased 42% year over year to 116.9 billion yuan, and the equity ratio increased 48% year on year to 218 billion yuan, and the equity ratio was 73%; at the end of the period, there were 311 projects in progress, with a total sales area of 15.52 million square meters; the land storage value was 266.8 billion yuan, of which land storage in Tier 1 and 2 cities accounted for 84%, and new projects in 2022 and beyond.

Property management has maintained a high growth rate, and the advantages of synergy are prominent. In 2023, the company's property management and other related services achieved revenue of 4.30 billion yuan, an increase of 43.9% over the previous year, accounting for 3.2% of total revenue. The increase was mainly due to the rapid increase in the construction area under management and the successful delivery of the housing hardware business. By category, property management revenue increased 56.8% year on year to 2.6 billion yuan; revenue from construction management and construction services increased 8.1% year on year to 1.15 billion yuan; and property rental income increased 22.5% year on year to 80 billion yuan.

Profit forecast and rating: The compound growth rate of the company's net profit to mother in 2024-2026 is expected to be 9.3%. Considering the company's strong sales resilience, high-quality land storage and steady development of diversified businesses, a target price of $16.23 (HK$17.60) for 2024 was given, maintaining a “buy” rating.

Risk warning: Sales and repayments fall short of expectations, C&D property profits fall short of expectations, industry regulation risks, etc.