FY23: Recurring business is strong, and overall performance is rising steadily; maintaining the “buying” company's FY23 performance: revenue +21% to $251.1 billion, core net profit +3% YoY to $27.8 billion. Recurring business revenue/core net profit accounted for 16%/34%, respectively, +0.7/10.4 pct. Thanks to the strength of the recurring business, the overall performance of the company increased steadily. Considering the impact of the decline in new home sales on the company's development business, we adjusted 24-26E EPS to 4.25/4.50/4.86 yuan (24-25E previous value: 4.26/4.51 yuan). Comparing the average value of the company's 24E PE to 7.6 times (Wind agreed). Considering the company's strong real estate management capabilities and financing advantages, we believe that the company's reasonable 24E PE is 9.1 times, adjusted the target price to 42.23 Hong Kong dollars (previous value: HK$32.88), and maintain the “buy” rating.
Sales and land acquisition remained stable in 23 years. Sales are expected to increase steadily in 24 years. The company's contract sales volume is +2% to 307 billion yuan. The average sales price and equity ratio have both increased compared to last year, and the market share of the development business is +0.3 pct to 2.6% year on year. The company maintained steady and accurate investment for 23 years. The land acquisition intensity was -1.5pct to 51% year over year, adding 8.63 million square meters of equity land reserves, and corresponding equity land payments of 111.8 billion yuan, +1%/+9% over the same period last year. At the same time, the company continues to focus on core cities to achieve real increases, with Tier 1 and 2 cities accounting for 93% of the new land storage value. The company plans to supply 530.8 billion dollars in 24, of which 88% of the value is in high-energy cities, and residential products account for 77%. We expect the company's development business sales to increase steadily in 2024, and it is expected that it will continue to maintain its TOP4 position in the industry.
The operational real estate business grew strongly. The asset management model platform first saw results in 23 years. The company's operating real estate business revenue/core net profit ratio was +31%/+48% YoY to 222/79 billion, and the growth momentum was strong. By business type, shopping center rental revenue was +30% to 17.9 billion, retail sales at the same store increased by 31%, and the overall occupancy rate remained high at 96.5%; office rent revenue was +10% to 2.1 billion, and the occupancy rate was +2.6 pct to 82%; hotel operating revenue was +66% to 2.3 billion, and the occupancy rate was +21pct to 63% year over year, and housing prices surpassed pre-pandemic levels. The company has built an asset management platform including an asset-light management platform and two public REITs platforms. At the end of the period, the company's asset management scale reached 4275 billion dollars. It is expected that this part of the assets will release asset value through asset management platforms in the future.
The debt structure was optimized, and sufficient carry-over resources supported steady performance growth. By the end of 23H2, the company's three red line indicators remained green. The average financing cost was -0.19 pct to 3.56% year over year, and non-RMB net debt exposure was -12.4 pct to 4.4% year over year. Financing costs and exchange rate risk hit new lows in recent years; the average debt period was 5.4 years, and the maturity structure was reasonable. The company's development business carry-over revenue/core profit in '23 was +20%/-11% YoY to $2121/18.2 billion. The decline in carry-over profit was mainly affected by product structure and inventory deductions. The company currently has 2841/87.3 billion unsold unconsolidated resources, of which 1939/66.9 billion is planned to be carried over within 24 years, and has locked in relatively sufficient carry-over resources. At the same time, the company will strengthen sales of carry-over resources during the year. Assuming that the carry-over profit margin remains stable, we expect the company's overall performance to maintain steady growth in 24 years.
Risk warning: Recurring business revenue growth falls short of expectations; development business carry-over falls short of expectations.