Core views:

Core net profit increased, and the dividend rate remained stable for four consecutive years. According to the annual results announcement, China Resources Land's revenue for 23 years was 251.14 billion yuan, +21% year-on-year, gross profit after tax deduction, +14%, net profit to mother of 31.37 billion yuan, +11.7% year-on-year, core net profit of 27.77 billion yuan, +2.9% year-on-year, and core net profit margin of 11.1%, a slight decrease of 2.0pct from '22.

The annual dividend amount was 10.28 billion yuan, accounting for 37.0% of the core share (4 consecutive years), and the dividend rate was 6.4%. The development property and recurring business contributed 18.2 billion yuan and 9.6 billion yuan of core net profit respectively. The core net profit margins were 8.6% and 24.5% respectively, and the core net profit contribution ratios were 16% and 34% respectively, up 1 pct and 10 pct respectively from '22, and the core net interest rate remained high.

The 24-year saleable resources are sufficient, and the elimination rate has increased with certainty. According to the company's annual report, the company's sales amount in '23 was 307 billion yuan, +1.7% year-on-year, equity sales amount was 215.5 billion yuan, +3.2% year-on-year, equity 70.2%, and sellable resources were sufficient for 24 years.

The investment side is aggressive and has acquired 8 new commercial projects in 23 years. The amount of land acquired in '23 was 178.32 billion yuan, +24% over the same period. The land acquisition effort was 58%, and the equity ratio was 63%. The share of land acquisition in the core 10 cities (73%) is higher than the share of sales (61%), and the profit margin on land acquisition continues to improve.

Profit forecasting and investment advice. In terms of profit forecasting, we expect core net profit for 24-25 (not considering REITs listing and fair value earnings) to be 28.7 billion yuan and 33.4 billion yuan, respectively, +13% year-on-year, +13% year-on-year, respectively, and net profit to mother of 363,41 billion yuan for 24-25, respectively. Refer to comparable companies for segmented valuation. The company's reasonable valuation level is RMB 242.3 billion, corresponding to a reasonable value of HK$37.47 per share (HKD/RMB exchange rate is 0.90655, 2024/3/29), maintaining a “buy” rating.

Risk warning. Buyers' confidence is insufficient, and the level of prosperity affects sales performance; declining housing prices are under pressure to impair value; promotional methods affect profit margins; and the proportion of luxury goods consumption falls short of expectations, and rents fall short of expectations.