Incident Overview

The company released its 2023 annual report. In 2023, the company achieved revenue of 1,524 million yuan, +2.79% year on year; net profit to mother of 806 million yuan, +2.97% year over year; net profit after deducted to mother was 792 million yuan, +3.93% year over year. In terms of cash flow, net cash flow from operating activities was 629 million yuan, or -42.94% over the same period. It is mainly the issuance and recovery of small loan loans and factoring payments by the company as net amounts as operating activities. The net recovery for the same period last year was 362 million yuan, and the current period was net disbursement of 168 million yuan. Looking at a single quarter, Q1/Q2/Q3/Q4 of 2023 achieved revenue of 3.90/3.84/3.384/366 million yuan, respectively, -0.23%/-3.68%/+27.71%/-6.74%; net profit to mother of 2.24/2.04/1.887/190 million yuan, respectively, -0.86%/-13.59%/+31.35%/+7.08%. In addition, the year-end dividend plan is a cash dividend of 6.8 yuan (tax included) for every 10 shares. The total amount of cash dividends for 23 years is estimated to be 808 million yuan (299 million yuan in the middle plus 509 million yuan at the end of the year). The annual dividend ratio is 100.25%, compared to the current dividend rate of 8.01%

Analytical judgment

Revenue side: The core business remains steady, and the Tianfu New Area project progresses smoothly

In 2023, the company achieved revenue of 1,524 million yuan, +2.79% year-on-year. During the reporting period, the country's commercial housing sales area was -8.5%, and terminal demand was still under heavy pressure, which suppressed the company's revenue growth to a certain extent; however, the company has been deeply involved in Chengdu for more than 20 years, and in a trend where industry incremental dividends are slowing down and stock competition intensifies, the company has a clear regional leading advantage, and its performance has remained resilient. By product, the company's market leasing and service/marketing advertising planning/commissioned operation management/decoration project/other revenue in 2023 was 13.06/0.09/0.14/1.23/0.72 billion yuan, respectively, +6.98%/+13.98%/+15.88%/-7.41%/-33.93%. The above businesses accounted for 85.68%/0.62%/0.89%/8.06%/4.75%, the company's core business market rental and service revenue 23H2 +14% YoY It shows that the company has excellent market operation capabilities; the decoration engineering business is affected by the general environment, which has dragged down the company's overall performance. During the reporting period, the company's Tianfu New Area project progressed smoothly. According to questions and answers from the company's investors on March 5, the project has now passed the parallel completion, inspection and filing by the construction department, and is ready for delivery and use; according to the overall positioning of “headquarters port” and “live broadcast port”, the company plans to lay out industrial ecosystems such as home living, live e-commerce, headquarters economy, etc., widely linking government and industry investment resources, and organizing multiple investment roadshows, project recommendations and resource matchmaking sessions to fully promote project investment. Currently, some brands and enterprises have signed contracts. We believe that the Tianfu New Area project will continue to advance. It is expected that the company's performance will gradually increase, and the future can be expected.

Profit side: The net interest rate improved significantly in Q4, and the expense ratio declined

In terms of profitability, the company achieved a gross profit margin of 70.18% in 2023, +1.21pct. The main reason was that depreciation and amortization expenses, which accounted for a large share of operating costs (39.63%) while showing steady performance on the revenue side, were -3.72% year-on-year. In 2023, the company's net profit margin fell 0.05pct year-on-year to 54.20%. Looking at a single quarter, in Q4 2023, the company's gross margin increased by 3.88pct to 70.26% year on year, net margin increased 6.37pct year on year to 51.75%, and increased 1.42pct year over month. In terms of expenses, the company's fee rate in 2023 was 5.30%, a year-on-year decrease of 0.04pct. Among them, the sales expense ratio was 0.51%, a year-on-year decrease of 0.07pct. The management fee rate was 4.85%, an increase of 0.04 pct over the previous year. The financial expense ratio was -0.06%, down 0.01pct year over year.

Investment advice

In the medium to long term, demand for homes will continue to be released, stimulated by the rate of urbanization, rising incomes, and increased demand for stocks. As a leading home furnishing store with a large scale and strong comprehensive competitiveness in the southwest region, the company has been deeply involved in Chengdu for 20 years. It has a high penetration rate, outstanding cost advantage of self-owned properties, and stable and long-term profits. Currently, it has a self-operated store with a construction area of more than 1.1 million square meters and more than 3,500 registered merchants. It is expected that its transaction volume and market share will continue to be at the forefront of the region. We believe that the current terminal demand is still under heavy pressure and that it will still take some time for the Tianfu New Area project to mature operation. We adjusted the company's 2024-2025 revenue from 16.85/1,887 billion yuan to 1,595/1,712 billion yuan, EPS from 1.21/1.37 yuan to 1.11/1.19 yuan, and added 2026 revenue of 1,854 million yuan and EPS 1.31 yuan forecast, corresponding to the closing of 13.48 yuan/share on March 28, 2024 The price and PE were 10 times 12/11/10, respectively, maintaining the company's “buy” rating.

Risk warning

1) Real estate sales fell short of expectations, leading to weakening demand for homes. 2) Competition has intensified in the home retail market in Sichuan. 3) The company's return on investment fell short of expectations.