Description of the event
The company achieved revenue of 346.8 billion yuan (+23.4%) and net profit of 12.1 billion yuan (-34.1%) in 2023. It plans to distribute a cash dividend of 4.1 yuan for every 10 shares, with a cash dividend ratio of 40.3%. If previous stock repurchases are taken into account, the total dividend ratio will reach 42.4%.
Incident comments
Performance was generally consistent with forecasts, and cyclical pressure led to a decline in performance. In 2023, the company achieved a completed area of 40.53 million square meters (+2.0%, 91.1% of the completion target), and the volume and price of the settlement side rose sharply (settlement area +21.4%, average price +3.5%). The final settlement revenue was +25.7% YoY to 322.5 billion yuan, driving revenue +23.4% YoY to 346.8 billion yuan.
Under cyclical pressure, gross margin and asset quality are also inevitably under pressure. In 2023, the company's gross margin for development and settlement fell 5.5 pct to 16.3% year on year, and comprehensive gross margin fell 6.0 pct to 16.0% year on year; due to prudential principles, asset impairment reserves were calculated at 5.04 billion yuan, affecting net profit of 3.28 billion yuan to mother. Investment income in joint ventures fell by 1.52 billion yuan. Although the downward cost ratio during the period hedged the pressure on performance, the company's final net profit to mother was -34.1% year-on-year to 12.1 billion yuan.
In terms of follow-up prospects, the 2024 completion target is 34 million square meters (-16.1% compared to 2023's actual), but the rising average sales price in the previous period may gradually be reflected in back-end settlement; advance receipt and potential carry-over volume are relatively abundant (1.17 in advance receiving/settlement at the end of 2023, 96.6 billion yuan in sold capital), and the company's performance is expected to gradually improve as low-cost land is settled one after another.
Sales peaked as scheduled, bucking the trend and supplementing the future scale of high-quality land storage guarantees. Although demand in the industry is still relatively sluggish, the company's sales performance is clearly superior to its peers due to its central enterprise background and excellent reputation, and its market share is steadily increasing. In 2023, the company achieved a sales amount of 422.2 billion yuan (-7.7%), an area of 23.86 million square meters (-13.2%), and an average price of 17,700 yuan/square meter (+6.3%). The results of deep cultivation in core urban areas are outstanding; the annual sales return rate is 101.9% (+8.5pct), and the sales return rate for the year is 78.3% (+11.2pct). In 2023, the company's sales ranking reached the top as desired, and the national market share also increased from 1.25% in 2011 to 3.62% in 2023. The company attached importance to the quality of land acquisition, bucked the trend to supplement high-quality soil storage, and the equity ratio also increased markedly. In 2023, the land acquisition amount was 163.2 billion yuan (-4.3%), the area was 10.75 million square meters (+2.0%), the average price was 152,000 yuan/square meter (-6.1%), leading the total reserves in the industry, and the equity ratio increased by 16 pct to 83% year on year; the land acquisition amount intensity was 38.6% (+1.4pct), and the average land acquisition price/sales price was 85.8% (-11.4pct). Land acquisition was more focused in the context of a weak market, and Xintuo's land storage flow rate and profit were well guaranteed. By the end of 2023, the company planned to store 77.9 million square meters of soil, and plans to start construction of 18 million square meters in 2024 (+20.7% compared to the actual situation in 2023), providing a strong guarantee for subsequent availability and scale.
Taking the initiative to increase the dividend ratio highlights the responsibility of central enterprises, and boosts market confidence by actively increasing holdings and repurchases. The company revised the 2023-2025 shareholder return plan and plans to increase the 2023-2025 cash dividend ratio by no less than 40%; the actual cash dividend ratio in 2023 is 40.3% (considering previous stock repurchases, the total dividend ratio is 42.4%), which is a significant increase from the 29.4% dividend ratio in 2022. Implementing the repurchase promise, as of 2024/3/7, when the repurchase period expires, a total of 105 million shares have been repurchased, with a disbursement capital of 1.0 billion yuan; the actual controller has increased its holdings by 27 million shares, amounting to 250 million yuan. The company's initiative to increase repurchases has strongly boosted market confidence.
Cyclical pressure does not change long-term logic; central enterprise leaders may have already entered the layout window on the left. Although cyclical pressure is inevitable, considering competitive advantages and long-term positions such as financing, land acquisition, and rate control, the expectations implied by the current valuation are too pessimistic; we only need to wait for an opportunity to recover. When high-quality land storage enters the settlement period in recent years, profitability is expected to increase; pattern optimization and share increase are the company's long-term deterministic logic, increasing the dividend ratio highlights the responsibility of central enterprises, and actively repurchases to increase holdings boosts market confidence. The estimated net profit for 2024-2026 is 121/130/13.7 billion yuan, corresponding to PE of 7.9/7.4/7.0X, maintaining a “buy” rating.
Risk warning
1. There is some uncertainty about when gross margin will bottom out; 2. If housing prices continue to decline, the company will still have some depreciation pressure.