Revenue growth and gross margin declined, leading the industry in diversified storage capacity, and maintained a “buy” rating. Yuexiu Real Estate released full-year results for 2023. The company's sales have maintained high growth, diversified methods of investment and land acquisition, and focused on high-energy cities. TOD and urban renewal businesses are progressing smoothly. Affected by the downturn in the sales market, we lowered 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is 35.2, 39.7 billion yuan, and 4.43 billion yuan (the original value in 2024-2025 was 51.5 billion yuan and 5.96 billion yuan), corresponding EPS was 0.88, 0.99, and 1.10 yuan. The current stock price corresponding to PE valuation is 4.5, 4.0, and 3.6 times, respectively. The company's sales and unrecorded amounts are sufficient, and a steady recovery in performance can be expected, maintaining a “buy” rating.
Revenue continues to grow, and gross margin is under year-on-year pressure
The company achieved annual revenue of 80.22 billion yuan, +10.8% year on year; realized net profit attributable to shareholders of 3.19 billion yuan, -19.4%; achieved core net profit of 3.49 billion yuan, -17.5% year on year; achieved operating cash flow of 8.35 billion yuan, with annual dividend of 0.347 yuan per share, maintaining a dividend ratio of 40% of core net profit. The decline in the company's profit was mainly due to (1) gross margin falling 5.2 percentage points to 15.3% year on year; (2) the net revaluation of investment property depreciation of 1,502 billion yuan; and (3) sales expenses increased 20.1% year on year.
The sales completion target was diversified, and the outstanding amount sold was sufficient. The company achieved a contract sales amount of 142.03 billion yuan for the whole year, +13.6% over the same period last year, and completed 107.6% of the sales target. Of these, Guangzhou's sales amount was 61.32 billion yuan, +15.3% over the same period last year. The company's 2024 sales target is 147 billion yuan, saleable resources are about 270 billion yuan, and the target elimination rate is 54%. By the end of 2023, the company had sold unrecorded contracts with sales amounting to 19.28 billion yuan, +11.3% over the same period last year. The company added 28 plots of land in 11 cities throughout the year through the “6+1" diversified storage platform, with a total construction area of 4.91 million square meters and an additional saleable value of about 130 billion yuan. All of them are located in Tier 1 and 2 cities, accounting for 53% of private storage. By the end of the year, the company had a total land reserve of 25.67 million square meters, of which the Greater Bay Area accounted for 41.9%, Guangzhou accounted for 38.2%, and Tier 1 and 2 cities accounted for 95%.
Deepening commercial and residential strategies and unblocking financing channels
The company's annual commercial operating revenue was +17.1% year-on-year, and the real estate+housing trust platform developed; Yuexiu's service revenue and shareholders' profits were +29.7% and +17.0% year-on-year, respectively, and +26.2% year-on-year, respectively. The company maintained its three red lines. The pre-debt ratio, net debt ratio and short-term cash debt ratio were 67.4%, 57.0%, and 2.01 times, respectively. The average borrowing cost fell 34 basis points to 3.82% year over year; issued 6.9 billion yuan of domestic corporate bonds throughout the year, with a weighted average annual interest rate of 3.37%; completed a net share offering of about HK$8.3 billion, and the shares were oversubscribed by 1.15 times.
Risk warning: Policy regulation risks, sales payback falls short of expectations, TOD project development process falls short of expectations.