Incident: China Resources Land released its 2023 annual report, achieving main business revenue of 251.14 billion yuan for the whole year, +21.3% year-on-year; achieving net profit of 31.37 billion yuan to mother, +11.7% year-on-year.
Sales bucked the trend, and the intensity of land acquisition remained positive. Sales side: The company achieved a contract area of 1.37 million square meters in 2023, achieving sales volume of 307.03 billion yuan (yoy +1.9%), and sales performance bucked the trend; in terms of land acquisition, the company added 13.25 million square meters of land planning and construction area in 2023, with a land acquisition intensity of 101.4% (land acquisition/contract area). The investment intensity remained active, supporting the steady expansion of the company's future market share, and the company's core regional resource reserves were sufficient. The investment in Tier 1 and 2 cities accounted for 93% of the total saleable value.
Revenue and profit have both increased, resources to be settled are abundant, and future performance is supported. Revenue side: The company achieved main business revenue of 251.14 billion yuan (yoy +21.3%) for the full year of 2023, of which the development business contributed 212.08 billion yuan (yoy +20.4%); profit side: the company's comprehensive gross profit margin for 2023 was 25.2%, of which the gross profit margin of the development business was 20.7%, maintaining a high level. The company achieved net profit of 31.37 billion yuan (yoy +11.7%) for the full year of 2023; Pending resources: By the end of 2023, the company had sold outstanding resources of 284.15 billion yuan It can cover 1.34 times the revenue from the development business in 2023, and future revenue is guaranteed.
The debt structure is steady, and financing costs continue to fall. The company used leverage to a high degree, and the “three red lines” maintained the “green tier”. The net interest-bearing debt ratio fell 6.2 pct to 32.6% from the end of 2022; the average financing cost was 3.56% (yoy-0.19pct), a new low in nearly ten years. Financing costs continued to decline, and three international rating agencies maintained the company's BaA1/BBB+ investment grade credit rating.
Diversified businesses continue to gain strength, and the second performance curve has a steep slope. In terms of diversified business, the company's operating real estate business turnover in 2023 was 22.23 billion yuan (yoy +30.6%); the asset light management business turnover was 10.64 billion yuan (yoy +27.7%); and the ecosystem factor business turnover was 6.19 billion yuan (yoy +11.6%). Operating revenue totaled 39.06 billion yuan (yoy +26.4%), accounting for 15.6% of total turnover.
Profit forecasting and valuation. The company's revenue and profits have both increased, the outstanding resources are abundant, the debt structure is stable, and the diversified business continues to grow. We expect the company to achieve operating income of 2791.2, 2985.3, and 313.22 billion yuan respectively in 2024-2026; net profit to mother will be 336.4, 363.7, and 38.54 billion yuan, respectively. The corresponding PE is 4.7x, 4.4x, and 4.1x, respectively. It was covered for the first time, and a “recommended” rating was given.
Risk warning: The real estate market continues to be sluggish; policy implementation falls short of expectations; rate control is not effective.