Core views:
Profit margins are under pressure, and depreciation pressure has declined. According to the company's annual report, the company achieved operating income of 56.41 billion yuan in '23, net profit to mother of 2.30 billion yuan, a year-on-year net profit of -26.9%, a dividend scale of 520 million yuan, a dividend ratio of 22.5%, an increase of 1.3 pct over '22, and a dividend yield of 9.3%. The company's overall gross margin of real estate settlement in '23 was 11.2% and 11.1% respectively, down 3.2 and 3.1 pct from '22. The scale of the company's impairment in 21-23 was 2.4, 26.7 billion yuan, and 1.45 billion yuan, respectively. The operating profit in '23 was 3.39 billion yuan, a year-on-year decrease of 34%, and the operating profit margin was 6.0%, down 3.0 pct from '22.
Sales are bucking the trend, and the third- and fourth-tier markets have a competitive advantage. According to the annual report, the company's sales amount in '23 was 42.8 billion yuan, +6.2% year on year, equity sales amount was 33.56 billion yuan, -1.8% year over year, equity ratio was 78.4%, full caliber repayment rate of 104.6%, and the repayment rate exceeded 100% for three consecutive years.
It acquired 9.8 billion yuan of land in 23 years, focusing on core cities. According to the annual report, the company obtained 13 projects in '23, with a total construction area of 1.84 million square meters, and a total land price of 9.8 billion yuan (equity of 7.7 billion yuan). The full-caliber and equity land acquisition efforts were 22.8% and 22.9% respectively, and the equity ratio increased. The investment side is further focused. Cities with a layout of more than 10 years account for 81% of the land acquisition amount, and the quality of investment has improved.
Profit forecasting and investment advice. The company's operating profit margin remained leading in 23 years, the scale of impairment was reduced by 46%, and the overall sales price of the project was stable. It is inseparable from the company's long-term steady business strategy, excellent management and control capabilities, and continuous improvement in product strength. The estimated net profit for 24-25 will be 2.56 billion yuan or 2.56 billion yuan, +2% and +9% year-on-year. Referring to comparable companies, the valuation was based on 4.0xPE in '24, corresponding to the company's reasonable value of RMB 9.5 billion, with a reasonable value of HK$2.95 per share (HKD/RMB exchange rate 0.9068 on April 2, '24), maintaining a “buy” rating.
Risk warning. The recovery progress of the industry's low-tier market falls short of expectations; there is some uncertainty about the company's sales scale; and the industry's profit margin level fluctuates.