Incident: The company released its 2023 annual report on April 15, 2024. In 2023, the company achieved operating income of 763.7 billion yuan (YoY -8.3%), net profit to mother of 13.1 billion yuan (YoY +108.8%), net profit attributable to mother after excluding restructuring proceeds from Macalline's merger (9.52 billion yuan) and Macalline's operating profit and loss (-550 million yuan) for September-December (-550 million yuan), net profit of 4.15 billion yuan (YoY -34.9%).
Depreciation accruals and falling gross margins have put pressure on the real estate industry's performance, and land acquisition sales are active. Real estate business revenue in 2023 was 166.5 billion yuan (YoY +21.9%), with net profit of 190 million yuan (YoY -91.6%), of which C&D Real Estate contributed 2.05 billion yuan, a year-on-year decrease of 25 billion yuan, while MediaTek contributed 1.86 billion yuan, a year-on-year decrease of 2.05 billion yuan. The sharp decline in the company's performance is mainly due to (1) the gross margin of the real estate business fell by 3.1 pct to 11.5% year on year in 2023; (2) C&D Real Estate and MediaTek Group calculated inventory price reduction preparations of 1.45 billion yuan and 1.48 billion yuan respectively. In 2023, the company achieved contract sales amount of 229.5 billion yuan (YoY +9.4%), full-caliber land acquisition amount of 132 billion yuan (YoY +28.2%), full-caliber goods worth 255.3 billion yuan, land acquisition amount/sales amount reaching 58%. The land acquisition effort was advanced in the industry, accounting for more than 90% of first-tier land acquisition, and the soil storage structure was excellent.
The annual performance of the supply chain operation business was relatively stable. In 2023, the company's supply chain business revenue was 593.4 billion yuan (YoY -14.8%) and net profit to mother was 3.95 billion yuan (YoY -1.4%). In an environment where commodity prices fluctuated sharply, the supply chain operation business performance was relatively stable. Among them, net profit from the Q1, Q2, Q3, and Q4 supply chain business was 8.5 billion yuan, 8.3 billion yuan, and 1.45 billion yuan, respectively, or -8.2%, and 45.6% year-on-year, respectively. Q4 performance exceeded expectations.
Various types of depreciation accruals drag down the performance of the home furnishing mall operation business. In 2023, the operating profit of Macalline's shopping mall leasing and operation business exceeded 1.4 billion yuan, but when preparing for asset impairment and credit impairment, lowering the fair value of investment real estate, and stopping some projects with returns that fell short of expectations, generated non-operating expenses of 3.16 billion yuan, and realized net profit of 2.22 billion yuan to the mother, which contributed -550 million yuan to the company in September-December.
The dividend rate is attractive. In 2023, the company plans to pay a dividend of 7 yuan for every 10 shares, with a total cash dividend of 2.1 billion yuan, with a dividend ratio of 58.7% (the ratio of net profit to mother after excluding restructuring proceeds). Based on the closing price of 9.91 yuan/share on April 15, 2024, the dividend ratio is 7.1%, and the dividend ratio is cost-effective.
Investment advice: Maintain a “buy” rating. Considering the high quality land storage layout of the company's real estate business and positive land acquisition performance, MediaTek Group is expected to reduce delays such as depreciation; while maintaining existing business advantages, the supply chain sector will accelerate the international layout and develop business opportunities at home and abroad. It is estimated that in 2024/2025/2026, the company's revenue is 8134/8527.889 billion yuan; net profit to mother is 54/60/65 billion yuan; corresponding EPS is 1.81/1.98/2.15 yuan; and corresponding PE is 5.7/5.2/4.8 times.
Risk warning: Relaxation of real estate policies falls short of expectations, improvement in gross margin of development business falls short of expectations, and risk of commodity price fluctuations.