Core net profit in '23 was +3% year-on-year, and net profit to mother was +12% year-on-year, in line with expectations. Recurring business contributed 34% of core profit. The company's revenue in '23 was 251.1 billion yuan, +21.3% year on year; net profit to mother was 31.4 billion yuan, +11.7% year on year; core net profit was 27.8 billion yuan, +2.9% year on year, of which recurring business contributed 34.4% and +10.4 pct year on year; basic income per share was 4.40 yuan, +11.7% year over year. Real estate settlement revenue was 22.1 billion yuan, +20.4% year over year; real estate settlement area was 11.84 million square meters, -4.0% year over year.
Gross profit margin, net profit margin, and core net interest rate were 25.2%, 12.5%, and 11.1%, respectively; the gross profit margin for real estate settlement was 20.7%, -2.3pct; the three-fee rate was 7.6%, +1.3pct, of which sales, management, and finance rates were +0.7 pct, +0.6 pct, and +0.0pct; investment income of 2.36 billion yuan, -42.5% year on year; IP fair value changed by 8.0 billion yuan, year on year + 14.7%; contract debt of 267.6 billion yuan at the end of 23, +18.5% year-on-year, covering 1.26 times the real estate settlement revenue in '23. In addition, the company plans to pay an annual dividend of 1.441 yuan per share, +2.9% year over year, corresponding to a dividend ratio of 37% (accounting for core net profit), which is the same as the previous year, corresponding to the 23A (3/26 closing price) dividend rate of 6.4%.
Sales in '23 were 307 billion yuan, +2% year over year, outperforming the industry. Land acquisition was active, and the land acquisition/sales ratio reached 58%. In '23, the company's sales amount was 307 billion yuan, +1.9% year on year; equity ratio was 70%, year on year +1pct; sales area was 13.07 million square meters, -8.3% year over year; average sales price was 23,400 yuan/square meter, +11.1% year over year. In 23 years, the company actively acquired land, with a land acquisition area of 13.25 million square meters, +21.0%; the amount of land acquired was 179.1 billion yuan, +24.2% year over year; the average land acquisition price was 13,500 yuan/square meter, +2.6% year over year. The land acquisition/sales amount ratio and area ratio were 58% and 101%, respectively, and the average land acquisition/sales price ratio was 58%, mainly due to the focus of land acquisition on core cities such as Beijing. At the end of 23, the company developed and sold 54.45 million square meters of land storage, of which the first and second line accounted for 73%, and about 68% of the soil storage value was composed of newly acquired projects in 2021 and after; IP storage was 10.04 million square meters, of which shopping centers accounted for 72%.
Retail sales of shopping malls were +44% year-on-year in '23, and operating revenue was 22.2 billion yuan, +31% year-on-year. 1) In terms of shopping malls, there were 117 stores at the end of '23 (8 new ones acquired in '23), of which 76 have already been opened (11 were newly opened in '23) and GRA960 10,000 square meters; of these, 12 luxury shopping malls have been opened, ranking first in the industry. Retail sales of shopping malls in '23 were 163.9 billion yuan, +44.2% year-on-year, and +31.2% year-on-year.
The 23-year rental fee was 17.85 billion yuan, +29.7% year over year; the rent-sale ratio was 12.2%, still low; the occupancy rate was 96.5%; the gross profit margin was 76%, +4.4pct year on year; the 23-year EBITDA return was 9.2%, +1.2pct year over year. 2) In terms of office buildings, the 23-year rent was 2.06 billion yuan, +10.2%; gross profit margin was 72.9%, +3.8pct year; 23-year EBITDA return 7.0%, +0.4pct year; occupancy rate 81.8%, +2.6 pct year over year. 3) In terms of hotels, revenue for 23 years was 2.32 billion yuan, +66% year on year; gross profit margin 17.5%, +16.6pct year on year; occupancy rate 63%, +21pct year on year. In summary, the company's total IP rent for 23 years was 22.2 billion yuan, +30.6% year-on-year; the company originally planned to achieve 30 billion rents in 2025E, corresponding to 16% of the 2023-25 ECAGR.
The three red lines are steady in the green zone, with low financing costs and obvious capital advantages, helping the company to buck the trend and expand. By the end of '23, the company was in the three red lines and the green tier. We calculated a pre-debt ratio of 58.4%, with a net debt ratio of only 31.1%, 1.8 times the short-term cash debt ratio; interest-bearing debt of 232.3 billion yuan, +5.2% YoY; financing costs 3.56%, -19bp; interest-bearing debt with an account period of 5.4 years, at a high position in the industry, with obvious financial advantages. Non-RMB net debt exposure accounted for 4.4%, -12.4pct year over year, and the financing structure continued to be optimized. By the end of '23, the company had sold outstanding amounts of $284.2 billion, +14.0% over the same period last year, covering 1.3 times the real estate settlement amount in '23, to help release future performance.
Investment analysis opinion: Steady increase in performance against adversity, model of high-quality development, and maintenance of the “buy” rating. Backed by China Resources Group, China Resources Land is an industry-leading urban investment and development operator. The company adheres to the “2+X” business model, where IP comprehensive strength is leading in the country. At the same time, the company's finances are stable in the green zone, and financing costs are at one of the lowest levels in the industry. The capital advantage is obvious, helping the company to buck the trend and expand. Considering the current pressure on industry sales, we lowered the company's 24-25 profit forecast to 323/34.1 billion yuan (originally 33.5/375 billion yuan), respectively, and introduced 37.5 billion yuan for 26. The current price corresponds to PE5.0X in 24, maintaining the “buy” rating.
Risk warning: Real estate regulation has been tightened beyond expectations, the sales removal rate has fallen short of expectations, and the progress of M&A business has fallen short of expectations.