Incident: The company announced its 2023 results; in 2023, the company achieved operating income of 251.1 billion yuan, an increase of 21.3% over the previous year, and net profit to mother of 31.4 billion yuan, an increase of 11.7% over the previous year.
Comment: Core net profit performance is stable, real estate business is developing with high quality, and financial operations are steady.
Revenue from many businesses increased, and core net profit performance was stable: in 2023, the company's development business settlement revenue was 212.1 billion yuan, up 20.4% year on year, mainly due to the timely settlement of uncarried forward properties sold in the previous period and the average carry-over price was 17,900 yuan/㎡, up 25.4% year on year. At the same time, total operating business revenue was 39.1 billion yuan, accounting for 15.6% of revenue, which was a year-on-year decrease of 1 pct, of which the gross margin of the development business decreased by 20.7% year-on-year 2.3 pct, gradually stabilizing; the company's core net profit was 27.8 billion yuan, up 2.9% year on year, corresponding core EPS was 3.89 yuan (we forecast 3.97 yuan), and the core net profit margin was 11.1%, still maintaining high profitability. Among them, the core net profit of the operating business contributed 34.4%, an increase of 10.4 pct over the previous year, becoming a new engine for profit growth.
Core cities have impressive sales performance and abundant high-energy value: in 2023, the company achieved sales of 307 billion yuan, ranking fourth in the industry, with a year-on-year increase of 0.3 percentage points in the market share, ranking in the top 5 of 24 cities. The competitive advantage and brand influence continue to expand; the company added 13.25 million square meters of land storage, corresponding equity land price of 111.8 billion yuan, and strong and active land acquisition capacity. Among them, Tier 1 and 2 cities accounted for 93% of total saleable value. By the end of 2023, the company held a total of 52.45 million square meters of land storage, and the share of Tier 1 and 2 cities had risen to 73%. High-quality land storage supported the steady development of the company.
The real estate business is developing with high quality, and the scale of asset management continues to increase: in 2023, the company opened 10 new shopping malls, achieving a shopping center turnover of 17.9 billion yuan, an increase of 29.7% over the previous year, and a occupancy rate of 96.5%. By the end of '23, the company's asset management scale reached 4275 billion yuan, an increase of 19.2% over the previous year. Among them, the company has 76 shopping malls and is expected to open 16 new shopping malls in '24. The leading scale advantage may be further enhanced; office occupancy rates and hotel occupancy rates have both increased markedly, and operating efficiency has recovered significantly.
Steady financial operations and continuous optimization of financing costs: In 2023, the company actively controlled the increase in the scale of financing, measured income and output, and supported new investment through operating cash flow. By the end of 2023, the company's total interest-bearing debt ratio and net interest-bearing debt ratio had fallen to industry lows of 38.4% and 32.6%, respectively, and weighted financing costs were only 3.56%.
Profit forecast, valuation and rating: Considering the recent slow recovery in the domestic real estate sales market, or reducing the company's future sales growth rate and gross margin repair level, we lowered the company's 24-25 core EPS forecast to 3.94 yuan and 4.09 yuan (original forecast was 4.12 yuan, 4.34 yuan), and added the company's 2026 core EPS forecast to 4.47 yuan. The current price corresponds to the 24-26 PE core valuation of 5.7/5.5/5.0 times, respectively. As a central real estate enterprise, the company has steady sales, abundant core land reserves, and operational performance The business is improving and maintaining a “buy” rating.
Risk warning: Sales push falls short of expectations, commencement and carry-over progress falls short of expectations, industry downturn exceeds expectations, etc.