High revenue growth and profit pressure. High-quality soil storage helped repair profits. Maintaining a “buy” rating, Binjiang Group published the 2023 annual report and the first quarter report of 2024. The company's revenue increased significantly in 2023, and profitability was under pressure; 2024Q1 revenue and profit continued to grow. Affected by sluggish real estate sales, we lowered the company's 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is 30.8, 38.3, and 4.41 billion yuan (the original value in 2024-2025 was 53.3 and 6.48 billion yuan), EPS was 0.99, 1.23, and 1.42 yuan, and the PE corresponding to the current stock price is 6.5, 5.2, and 4.5 times. The company's investment focuses on high-quality cities in the Yangtze River Delta. The debt structure continues to be optimized. Profit recovery can be expected after being carried over at a high price, and the “buy” rating is maintained.
Revenue increased year-on-year, and inventory depreciation eroded profits
In 2023, the company achieved operating income of 70.44 billion yuan, a year-on-year increase of 69.7%; net profit to mother of 2.53 billion yuan, a year-on-year decrease of 32.4%; net operating cash flow of 32.65 billion yuan, an increase of 526% over the previous year, and basic earnings per share of 0.81 yuan. The decline in the company's profit was mainly due to (1) the gross carry-over margin of the real estate sector falling 0.71 pct to 16.43%; (2) asset impairment losses of 3.78 billion yuan due to falling inventory prices. The company achieved revenue of 13.70 billion yuan in 2024Q1, an increase of 35.9% over the previous year; net profit to mother was 660 million yuan, an increase of 17.8% over the previous year.
Sales rankings improved, and high-quality soil storage was added
In 2023, the company's sales amount was 153.47 billion yuan, which is basically the same as the previous year. Kerui's sales ranking rose 2 places to 11th place. It won the Hangzhou sales championship for 6 consecutive years, and the cash return from equity sales reached a record high of 73.2 billion yuan. According to Kerry data, the company achieved sales of 26.32 billion yuan in the first quarter of 2024, continuing to rise 3 places from 2023 to 8th place. The company added 3.3 million square meters of construction in 2023, with an equity land payment of 25.6 billion yuan. By the end of 2023, the company's total land reserves were 13.2 million square meters, accounting for 60% of the land reserves in Hangzhou, 25% in other second- and third-tier cities in Zhejiang Province, and 15% outside Zhejiang Province. The soil storage and distribution structure was excellent.
Debt continues to be steady, and diversified businesses have long-term growth potential
As of the end of 2023, the company's consolidated interest-bearing debt was 41,518 billion yuan, of which bank loans accounted for 79.8% and direct financing accounted for 20.2%; the balance ratio was 56.41%, and the net debt ratio was 15.08%. Short-term cash debt ratio was 2.42 times, and the three red lines remained green; comprehensive financing costs fell 0.4 pct to 4.2% year on year in 2023. The company adheres to the “1+5” development strategy. By the end of 2023, the company held about 378,000 square meters of rental space, achieved rent revenue of 360 million yuan, and at the same time restarted the contract construction business. In 2024, it aims to add 5-10 contract construction projects.
Risk warning: Sales recovery falls short of expectations, the decline in the Hangzhou market falls short of expectations, and the company's land acquisition falls short of expectations.