Event: The company released its 2023 annual report. In '23, the company achieved operating income of about 763.7 billion yuan, a year-on-year decrease of 8.3% (after adjustment); realized net profit of 13.1 billion yuan, an increase of 109% (after adjustment); realized net profit without deduction of 2.4 billion yuan, a year-on-year decrease of 34.9% (after adjustment). Excluding the restructuring proceeds of Red Star Macalline, the company achieved net profit of 3.58 billion yuan to mother in '23, a year-on-year decrease of 43.0%. The company plans to pay a cash dividend of 0.7 yuan/share, with a cash dividend rate of about 68% (excluding restructuring proceeds and interest on perpetual bonds).

The macroeconomic growth rate declined, and supply chain business profits declined year-on-year. The company's supply chain business achieved revenue of 593.4 billion yuan in 2023, a year-on-year decrease of 14.8%, and realized net profit to mother of 3.95 billion yuan, a year-on-year decrease of 1.4%. In an environment where commodity prices fluctuate sharply, the company's operating performance is relatively stable, thanks to the company's steady risk control capabilities, and also reflects the results of the implementation of the company's strategies of specialization, internationalization, logistics support, investment support, financial empowerment, and technological empowerment. The company's supply chain business has firmly implemented the “specialization” and “internationalization” development strategy. Despite the downward cycle of commodity prices, the company has consolidated the market share of core products.

Real estate industry profits fell sharply year on year, taking into account preparations for large inventory price declines. In 2023, the company C&D Real Estate and MediaTek Group achieved a total sales amount of 229.5 billion yuan, an increase of 9.4% over the previous year, and achieved equity sales of 156.1 billion yuan, an increase of 6.7% over the previous year. In 2023, the company's real estate business achieved operating income of 166.4 billion yuan, an increase of 21.9%; in 2023, the gross margin of the company's real estate business was about 11.5%, a year-on-year decrease of 3.13 pct, achieving net profit to mother of 190 million yuan, a year-on-year decrease of 2,075 billion yuan, mainly because the subsidiaries C&D Real Estate and MediaTek Group combined to prepare 2,931 billion yuan for inventory price reductions. In 2023, the company obtained 91 lots of high-quality land, totaling about 132 billion yuan in full-caliber land acquisition, of which Tier 1 and 2 cities accounted for more than 90% of the land acquisition amount.

Macalline calculated impairment preparations and indicated a negative contribution to the company's profits. In 2023, the operating profit of Macalline's shopping mall leasing and operation business exceeded 1.4 billion yuan; however, in 2023, Macalline calculated asset impairment preparations and credit impairment preparations, lowered the fair value of investment real estate, and stopped some projects with lower returns than expected to incur non-operating expenses. The total amount of the above four items was $3.161 billion, resulting in net profit of -216 billion yuan.

From September to December 2023, Macalline's net profit to C&D contributed -563 million yuan.

The downward pressure on economic growth is still present, and the company's 2024 revenue target is lower than the previous year. The company disclosed its 2024 operating budget target: striving to achieve revenue of 700 billion yuan, with estimated costs and expenses (operating costs+taxes and additions+sales expenses+management expenses+R&D expenses+financial expenses) totaling 687.5 billion yuan.

Investment advice: The macroeconomic growth rate declined, and the company's short-term profits were under pressure; the real estate business and Macalline planned large price reduction/depreciation preparations, and the company's non-profit deduction declined sharply in 23 years. Considering the downward impact of the economic growth rate, we lowered the 24-25 net profit forecast of 13%/13% to 6.17 billion yuan and 6.99 billion yuan, respectively, and added the 26-year net profit forecast of 7.97 billion yuan; based on the company's leading position in the bulk supply chain business and future macroeconomic recovery and real estate policy optimization, we maintained the company's “increase” rating.

Risk warning: Risk of commodity price fluctuations, leading to customer default; business risks, such as partner default, loss of goods, etc.; financial risks, such as rising capital costs due to falling ratings; declining real estate business revenue and profit margins; companies being further punished by regulation due to compliance or other reasons.