C&D released the 2023 Annual Report on April 15, 2024:

Throughout 2023, the company achieved operating income of 763.678 billion yuan, a year-on-year decrease of 8.30%; realized net profit of 13.104 billion yuan, a year-on-year increase of 108.83%; realized net profit of 2.407 billion yuan, a year-on-year decrease of 34.90%; basic earnings per share was 4.29 yuan, an increase of 123.44%; and a weighted average return on net assets was 24.85%, an increase of 12.23 percentage points year-on-year.

In Q4 2023, the company achieved revenue of 164.974 billion yuan, a year-on-year decrease of 38.50% and a month-on-month decrease of 23.

37%; realized net profit of 683 million yuan, down 73.78% year on year and 93.49% month on month.

The company plans to distribute a cash dividend of 7 yuan (tax included) for every 10 shares in 2023. The proposed cash dividend accounts for 58.71% of net profit to mother after excluding restructuring proceeds. Based on the closing price of 9.91 yuan on April 15, 2024, the estimated dividend rate is approximately 7.1%.

The increase in restructuring revenue was due to net profit, and the current performance of the three major businesses was under pressure. In 2023, the company and MediaTek Group acquired 29.95% of Macalline's shares in cash, generating restructuring revenue of 9.619 billion yuan, of which 9.522 billion yuan was restructured revenue, which led to a year-on-year increase in the company's net profit to mother. In terms of main business, the supply chain operation business segment achieved net profit of 3,953 million yuan, a year-on-year decrease of 55 million yuan; the real estate business segment achieved net profit of 191 million yuan, a year-on-year decrease of 2,075 billion yuan. Among them, the net profit to mother contributed by the subsidiaries C&D Real Estate and MediaTek Group decreased by 0.25 billion yuan and 2,050 billion yuan, respectively; and the home furnishing mall operation business segment (September-December) achieved net profit to mother of 563 million yuan.

Supply chain business: Consolidate core competitive advantages and comprehensive domestic and international layout. 1) In an environment where demand for products is weak, prices fluctuate greatly, and industry competition intensifies, the market share of the company's main products is rising steadily. In 2023, C&D Steel Group's cooperative volume with major state-owned listed and large-scale private steel mills increased by more than 23%, and the volume of cooperation with major iron ore suppliers such as international mines increased by nearly 55%; C&D Pulp & Paper Group's cooperative volume with large domestic and foreign pulp suppliers increased by 16%; and C&D Agricultural Products Group's cooperative volume with large international food merchants increased by nearly 32%. 2) The company actively integrates into domestic and international markets. In 2023, the import and export and international business volume reached US$43.8 billion, an increase of 8.38% over the previous year. Domestically, in 2023, the company's procurement from suppliers in the Midwest and sales to customers in the Midwest all exceeded 200 billion yuan, an increase of about 8% over the previous year. Internationally, in 2023, the scale of trade between the company and APEC countries exceeded 29 billion US dollars, an increase of more than 9%; the scale of trade with countries along the “Belt and Road” was nearly 17 billion US dollars, an increase of more than 16%; and the scale of trade with RCEP member countries exceeded 15 billion US dollars, an increase of more than 10% over the previous year.

Real estate business: Sales volume has increased, and a steady investment strategy has been maintained. 1) In 2023, the company's real estate business division achieved a total contract sales amount of 229.479 billion yuan (full caliber), an increase of 9.42% over the previous year. 2) In 2023, the company obtained 91 lots of high-quality land using diversified methods, with a total acquisition amount of about 132,028 billion yuan. Of these, first-tier and second-tier cities accounted for more than 90% of the land acquisition amount, focusing on obtaining multiple high-quality projects in Shanghai, Xiamen, Hangzhou, Beijing, Suzhou and other places. By the end of 2023, the company's full-caliber land reserves (unsold caliber) accounted for about 73.57% of the value of goods in Tier 1 and 2 cities, an increase of 5.48 percentage points over the end of the previous year.

Profit forecast, valuation and investment rating: The net profit to be achieved by the company in 2024-2026 is estimated to be $66.75, 77.37, and $8.921 billion (with additional profit forecast for 2026), with earnings per share of 2.22, 2.58, and 2.97 yuan, respectively. The current stock price is 9.91 yuan. The corresponding PE is 4.5X/3.8X/3.3X, respectively, maintaining a “buy” rating.

Risk warning: macroeconomic downturn risk, commodity price fluctuation risk, real estate business operation falling short of expectations, risk of the company receiving “warning letters” and “regulatory dialogue measures decisions”, risk of untimely information and data updates.