Core views

In 2023, the company achieved revenue of 72.15 billion yuan, a year-on-year increase of 19.4%; realized net profit of 1.84 billion yuan to mother, a year-on-year decrease of 29.6%. The company plans to pay a dividend of 0.37 yuan/share at the end of the year, with a cash dividend rate of 55.4%, a significant increase of 24.2 percentage points over the past three years of 31.2%. The current dividend rate is 5.9%. The decline in performance was mainly due to a decline in gross margin and an increase in inventory impairment due to the impact of the industry. The company's sales volume for the full year of 2023 was 126 billion yuan, up 4.8% year on year. This is better than the 14.5% drop in the performance of the top 20 housing enterprises. The land acquisition focus was on core cities, and the land acquisition intensity was 32%.

occurrences

The company released its annual report. In 2023, it achieved operating income of 72.15 billion yuan, an increase of 19.4% year on year; realized net profit of 1.84 billion yuan to mother, a year-on-year decrease of 29.6%. In 2023, the company plans to pay a dividend of 0.37 yuan/share, accounting for 55.4% of the current net profit to mother.

Brief review

Performance declined due to the influence of the industry, and the high dividend ratio highlighted the value of dividends. In 2023, the company achieved operating income of 72.15 billion yuan, a year-on-year increase of 19.4%; net profit to mother was 1.84 billion yuan, down 29.6% year on year, and net profit fell short of the revenue growth rate: (1) profitability declined, and gross margin for annual settlement was 18.1%, down 2.05 percentage points from 2022; (2) calculated inventory depreciation of 1.59 billion yuan, up 110.0% year on year; (3) sales expenses of 2.38 billion yuan, up 26.6% year on year. In 2023, the company plans to pay a dividend of 0.37 yuan/share, with a cash dividend rate of 55.4%. The average annual dividend rate for the past three years (2020-2021) was 31.2%. There was a significant increase this year, up 24.2 percentage points from before. The dividend rate calculated at the latest closing price is 5.9%, which highlights the value of the dividend.

Sales bucked the trend and outperformed peers, and the East China region was the ballast stone. In 2023, full-caliber sales amounted to 126 billion yuan, up 4.8% year on year, which is significantly better than the 14.5% decline in the top 20 housing companies' performance. The company ranked 14th in annual sales, an increase of 4 places over 2022. The East China region is the company's sales of ballast stones, accounting for 55% of sales in 2023, while the South China region, Zhuhai region, and the northern region account for 25%, 15%, and 5% respectively.

Land acquisition focuses on core cities, and focuses on replenishing stocks in Shanghai. The company obtained a total of 23 projects through tenders and mergers and acquisitions throughout the year, with a full-caliber land acquisition amount of 40.74 billion yuan, accounting for 32% of full-caliber sales, an increase of 1.7 percentage points over 2022. The intensity of land acquisition is at a high level among mainstream housing enterprises. The new projects are mainly concentrated in Tier 1 and 2 cities across the country, focusing on Shanghai, Hangzhou, Chengdu, Guangzhou and Nanjing. Among them, Shanghai acquired 19.6 billion yuan of land, and Shanghai, Hangzhou and Rong together accounted for more than 75% of the annual land acquisition amount, laying a solid foundation for sales performance in 2024.

Financing costs have declined further, and the financing window has been actively grasped. The company's annual comprehensive financing costs were 5.48%, a further decrease of 0.28 percentage points from 2022, and the “Three Red Lines” indicator continued to remain stable in the green zone. The company actively grasped the financing window, and after successfully landing the “third arrow”, the first order was increased, raising 5.12 billion yuan in capital; the first rental housing pre-REIT project and REIT-like secondary share resale were also launched one after another.

The profit forecast and target price were lowered, and the purchase rating remained unchanged. We forecast the company's EPS for 2024-2026 to be 0.71/0.75/0.78 yuan respectively (the original forecast was 1.39/1.57/1.77 yuan for 2023-2025). Comparable companies were given an average PE valuation of 14x, corresponding to a target price of 9.94 yuan.

Risk analysis

The company's risks are mainly reflected in three aspects: carry-over falls short of expectations, declining profit margins, and policy relaxation in the real estate industry falls short of expectations. Specifically: 1. The carry-over may fall short of expectations. The company currently has sufficient carry-over resources, but the progress of the project is uneven and may be affected by the epidemic prevention and control policy. Ultimately, the revenue on the reporting side will ultimately depend on delivery conditions during the reporting period, so there is a risk that the carry-over will fall short of expectations; 2. Profit margins may decline.

As land transaction prices have risen in recent years, sales prices have been adversely affected by the market downturn. The industry is generally affected by gross margin compression, and the company is also affected by this, and profit margins on the reporting side may continue to be under pressure; 3. The relaxation of policies in the real estate industry may fall short of expectations, which may delay the company's sales recovery progress.