Real estate investment is active and maintains a “buy” rating

The company released its annual report on April 15. In 2023, it achieved revenue of 763.68 billion yuan (YOY -8.3%), net profit to mother of 13.10 billion yuan (YOY +108.8%), net profit of 2.41 billion yuan (YOY -34.9%), and plans to pay 7 yuan for every 10 shares, in line with the performance forecast. Due to the decline in real estate sentiment, which may lead to further depreciation, we expect EPS to be 1.74/2.02/2.35 yuan (previous value 2.06/2.38/- yuan) in 2024-2026, and the average PE expected by large housing enterprises and supply chain companies to be 7.3/8.4x in line with the 24-year Wind consensus. We give a diversified discount of 10% and a target price of 12.55 yuan (previous value: 12.25 yuan), confirming the “buy” rating.

Real estate business: Impacts such as depreciation have led to a decline in net profit deductions. During the period of contrarian growth in sales and land acquisition, reorganization revenue of 9.49 billion yuan was confirmed, driving a high increase in net profit attributable to mother. However, due to the effects of declining real estate market sentiment and Macallon's depreciation, net profit not attributable to mother declined. The gross margin of the real estate sector fell 3.1 pct to 11.5%; at the same time, preparations for price reductions of 2.93 billion yuan were made. C&D International and MediaTek Group achieved total sales of 229.2 billion yuan throughout the year, with C&D International +11.8% year-on-year, higher than the average growth rate of the top 100 real estate companies of 30pct. The industry ranking rose 1 place to 8th place from '22. The total amount of land acquired by the two platforms for the year was about 132 billion dollars, the equity amount of land acquisition was 95.5 billion, and the land acquisition intensity reached 61%. C&D International's equity land acquisition amount reached 73.8 billion, of which 89% was invested in Tier 1 and 2 cities, focusing on Xiamen, Shanghai, and Hangzhou. The total amount of land acquired by C&D International was 26.3 billion yuan. An active storage expansion strategy lays the foundation for scale growth.

Supply chain business: Stable under market fluctuations, laying the foundation for long-term development, commodity prices fluctuated greatly in 23 years. The Nanhua Metal/Energy Index was +8.5%/+2.4%, -2.6%/-14.3%, +16.3%/+1.6%, +10.6%/3.8%, respectively, in the four quarters (data source:

Wind), operating difficulties increased, and the company's supply chain revenue fell by 14.8%; however, due to the firm's steady risk control and the implementation of strategies such as internationalization, multiple categories, and finance/technology empowerment, net profit to mother fell by only 1.4% year-on-year, less than the revenue decline. Looking ahead, the company will continue to strengthen its global and multi-category business layout, and its leading position is more stable, and it is expected that it will continue to achieve both share and profit growth.

Financing advantages help the company expand, and high dividends enhance investment value

State-owned enterprises+dual main businesses strengthen the company's financing advantages. The total amount of financing for the full year of 2023 was 10.7 billion yuan, with an interest rate range of 2.2%-4.3%, of which 4.7 billion dollars were issued in Q4. The interest rate on corporate bonds issued was +16bps compared to Q3, but it was still low at 4.07%. The company's planned dividends for 2023 account for 58.7% of net profit due to mother (net of restructuring proceeds), demonstrating the company's sincerity. The corresponding closing price on April 15, the dividend rate was as high as 7.1%, demonstrating the company's sincerity. We are optimistic about the company's financing advantages, high-quality land storage, and turnover capacity, combined with high dividend support, and maintain a “buy” rating.

Risk warning: downside risk in industry sales, risk of bulk price fluctuations.