Introduction to this report:
The company's revenue growth in 2023 also increased profits, but gross margin bottomed out due to temporary pressure on the development business; the expansion of the scale of operational real estate, in line with the construction of a commercial REITs platform, will help the company transform to a large asset management model.
Summary:
The company's 2023 performance is in line with expectations. While stabilizing its leading position in the development and sales business, it continues to explore and develop diversified businesses and maintain an increase in holdings rating. In 2023, the company's revenue was 251.1 billion yuan (RMB, same below), up 21.3% year on year, and net profit to mother was 31.4 billion yuan, up 11.7% year on year, with dividends of about 1.4 yuan per share. Considering that the industry is in a restoration period and that the company's operating real estate is accelerating high-quality development, the 2024-2025 EPS was adjusted to 4.42 yuan/4.88 yuan (originally 4.59 yuan/5.18 yuan), and the 2026 EPS was added to 5.39 yuan, maintaining the shareholding rating.
Affected by market pressure, the decline in gross margin of the company's development and sales business led to a bottom in overall gross margin. In 2023, the company's gross margin was 25.2%, down 1 pct year on year. Among them, the gross margin of the development and sales business fell 2.3 pct to 20.7%, related to industry adjustments and project layout, while the gross margin of the operating real estate business increased by 4 pcts to 69.6%. It is expected that gross margin will improve as the share of revenue from high-margin businesses increases and the real estate industry gradually recovers.
Land acquisition remained focused, and investment declined to 36.4%. In 2023, the company's sales rose 1.9% year over year, ranking fourth in the industry. Investment in land acquisition fell 11.5 pct year on year to 36.4%, and the share of investment in Tier 1 and 2 cities among the 68 newly acquired projects was 92.8%. The strategy to focus on the core is clear. Furthermore, by the end of 2023, the company had sold a sales amount of about 193.9 billion yuan, which is expected to be settled in 2024. Combining resilient sales performance in recent years and relatively abundant land reserves for development properties, the expected follow-up performance is guaranteed to a certain extent.
The business structure was optimized at an accelerated pace, and the transformation of large asset management progressed steadily. In 2023, the company's share of non-development revenue increased by 0.6 pct to 15.6%. Operating real estate revenue in the non-development business rose 30.6% year on year, mainly due to: 1) scale expansion, and the total construction area rose 17.6% year on year in 2023. Based on current investment property land storage, full investment will also bring about a scale increase of more than 80%; 2) Good operation or improvement. 80% of shopping malls that have already opened rank in the top three in the region in terms of retail sales, an increase in office occupancy rate of 2.6 pcts, and an increase in hotel housing prices. At the same time, with the listing of Huaxia Huarun Commercial REIT, the company has completed the construction of a commercial REITs platform. In line with the continuous increase in the scale of asset management, the company is actively transforming into a major asset management business.
Risk warning: Sales declined beyond expectations due to insufficient industry demand, and the transformed business fell short of expectations