Event: The company announced 2023 and 2024Q1 results. Throughout 2023, the company achieved revenue of 70.443 billion yuan (yoy +69.73%), achieving net profit of 2,529 billion yuan (yoy -32.41%); with 2024Q1, the company achieved revenue of 13.701 billion yuan (yoy +35.85%), achieving net profit of 660 million yuan (yoy +17.84%).
There was a year-on-year increase in revenue for the whole year, and many factors put pressure on the mother's net profit. In 2023, the company achieved revenue of 70.443 billion yuan (yoy +69.73%). By business, real estate sales revenue recorded 69.335 billion yuan (yoy +70.49%), accounting for 98.43% of total revenue. The company achieved net profit of 2,529 billion yuan (yoy -32.41%) for the whole year, changing from positive to negative year-on-year. The main reasons were: ① the industry continued to reduce profit margins, and the gross margin of the company's real estate sales business recorded 16.43% (yoy-0.71pct) in 2023; ② the company calculated inventory price reduction preparations in 2023, resulting in asset impairment of -7.78 billion yuan, accounting for -75.06% of total profit, reducing profitability.
With 2024Q1, the company achieved revenue of 13.701 billion yuan, +35.85% year-on-year, continuing the growth trend; net profit to mother of 660 million yuan, +17.84% year-on-year, and the profit pressure situation improved markedly.
Sales are stable, repayments have increased, and the leading position in the region is stable. The company's sales performance in 2023 was good, achieving sales of 154.37 billion yuan, a year-on-year change of +0.3%, which is basically the same as the previous year. It ranked 11th in the sales ranking of the Clarisse industry (up 2 places), and maintained the regional sales championship in the Hangzhou market for 6 consecutive years. The company's cash flow situation is sufficient. Net operating cash flow increased year-on-year in 2023, recording a year-on-year increase of 32.65 billion yuan (+526.24%), mainly due to the annual return of equity sales of 73.2 billion yuan (historical high), providing reasonable support for the high increase in net operating cash flow.
2024Q1, the company's net operating cash flow was under pressure and recorded 2,377 billion yuan (yoy -131.18%), mainly due to a decrease in cash received from the sale of goods and provision of services in the current period.
Rates are optimized, soil storage is of high quality, and performance reservoirs remain high. In 2023, the company's sales rate and management rate were 1.22% (yoy-0.73pct) and 1.10% (yoy-0.41pct), respectively, and the rate optimization results were remarkable. In 2023, the company added 33 new land reserve projects, including 27 in Hangzhou, further consolidating Hangzhou's market share; during the year, the planned construction area of 3.33 million square meters and the equity land payment was 25.6 billion yuan. High-quality land reserves provided a good guarantee for the company's future sustainable development. At the end of 2023, the company's unsettled advance housing payments were 143 billion yuan, an increase of 9.73% over the previous year, which could cover 2.03 times the settlement revenue in 2023. The performance reservoir remained high, forming a strong support for future settlement revenue.
2024Q1, the company's sales rate and management rate were 1.15% and 1.13%, respectively. Compared with the 2023 level, the change was -0.07pct and +0.03pct, respectively. The overall decrease was 0.04pct, and the rate optimization continued to be effective.
Finances are steady, the three red lines are stable in the “green tier”, and financing costs continue to drop. The company maintained steady operation in 2023 and maintained a reasonable level of interest-bearing debt. At the end of the reporting period, the company's equity and interest-bearing liabilities fell by 11 billion yuan to 36 billion yuan. In terms of composition, bank loans accounted for 79.8% and direct financing accounted for 20.2%; in terms of term, short-term debt was 13.507 billion yuan, accounting for only 32.53%, and short-term debt repayment pressure was small. A good debt structure enabled the company's three red line monitoring indicators to maintain the “green level”: the pre-balance ratio was 56.41%; the net debt ratio was 15.08%; and the short-term cash debt ratio was 2.42 times. The company's average financing cost at the end of 2023 was 4.2% (yoy-0.4pct), continuing the downward trend since 2020 and further reducing the pressure on the company to repay its debts.
Profit forecast and valuation: The company's revenue increased year-on-year, with good sales performance, continued to be stable in finance, and rich in land reserves. The performance reservoir remains high. At the same time, it is deeply involved in the Hangzhou region, and may benefit from the new Hangzhou property market policy. We expect the company's revenue for 2024-2026 to be 777.05 billion yuan, 853.9 billion yuan, and 93.362 billion yuan, respectively, and net profit to mother of 28.22 billion yuan, 31.44 billion yuan, and 3.498 billion yuan respectively. Corresponding PE is 7.08x, 6.35x, and 5.71x respectively, maintaining the “recommended” rating.
Risk warning: The real estate market continues to be sluggish; policy implementation falls short of expectations; cross-regional operating risks.