Revenue is relatively stable, but performance is under pressure. In 2023, the company achieved operating income of 465.7 billion yuan, -8% year-on-year; net profit to mother was 12.2 billion yuan, -46% year-on-year. Among them, Q4's revenue for the single quarter was 175.4 billion yuan, +6% year-on-year; net profit to mother was 1.5 billion yuan, which was the first loss. The net profit to the mother decreased by 3.55 billion yuan due mainly to preparation for falling inventory prices of 4.85 billion yuan (including non-consolidated statements) at the end of the year.
Gross profit margins continue to bottom out, continuing to affect net profit margins to mother. In 2023, the company's comprehensive gross profit margin was 15.2%, down 4.3 percentage points year on year; net profit margin to mother was 2.6%, down 1.9 percentage points year on year. Among them, Q4 gross margin was only 11.4%, mainly due to the increase in land prices as a share of sales prices. In 2023, the company's net profit ratio remained around 60%; the sales rate was 2.64%, which was basically the same in recent years; and the management rate was 1.24%, which was steadily decreasing year by year.
The decline in sales volume has narrowed. In 2023, the company achieved contracted sales of 376.1 billion yuan, -10% year-on-year; sales area of 24.66 million square meters, -6% year-on-year; average sales price of 15,000 yuan/㎡, -4% year-on-year. Although difficult to compare with sales during peak periods, the year-on-year decline in sales has narrowed; the sales market share has basically stabilized at 3.2%.
Investment intensity has steadily rebounded, and the quality of new soil storage is high. In 2023, the company added 5.29 million square meters of land storage, -14% over the same period last year; the coverage ratio of the new land storage area for the year was 0.24, showing a steady trend; the investment intensity in terms of land acquisition amount/sales amount was 22%, an increase of 2 percentage points over the previous year. In 2023, the company added high quality soil storage, accounting for 98% of the investment amount in Tier 1 and 2 cities, and Beijing, Shanghai, Hangzhou and Chengdu accounting for nearly 40% of the new value added. The average land price for newly acquired projects was 139,000 yuan/㎡. Compared with the average sales price of 15,000 yuan/㎡ in 2023, the real estate ratio was record low, and higher quality land storage provides a guarantee for future removal.
Face up to operating pressure and make every effort to ensure healthy cash flow. The company's total assets and liabilities continued to shrink, but the debt ratio also continued to decline. As of the end of 2023, the ratio of short-term cash debt was 1.6, and there is no need to worry about repayment of interest-bearing debts due within one year. The company's net operating cash flow remained positive in 2023. The company's management stated that it will respond positively to market changes, ensure a safe bottom line, strengthen repayment, firmly reduce leverage, and reduce food efficiency.
Considering that the company has witnessed the birth and development of the commercial housing market in China and has successfully passed through many real estate cycles, we believe the company is capable of withstanding the downward pressure of this cycle.
Investment advice: Considering the settlement scale of the real estate development business and downward pressure on gross margin, we have lowered our profit forecast, but we are still optimistic about the company's ability to operate through the real estate cycle many times in the 40 years since its establishment. The company's net profit for 2024-2025 is estimated to be 97/9.6 billion yuan (the previous forecast was 242/24.5 billion yuan, respectively), with corresponding earnings per share of 0.81/0.80 yuan, corresponding to the current share price PE of 10.1/10.2 times, respectively, maintaining a “buy” rating.
Risk warning: The sales scale and carry-over progress of the company's development properties fell short of expectations, and the financing capacity fell short of expectations.