Introduction to this report:

Although the company's profit margin declined year-on-year in the first quarter of 2024, it picked up compared to 2023. Q1 Land investment was cautious, but the land acquisition equity ratio remained above 90%, and the overall construction pace accelerated in 2024.

Key points of investment:

The performance was in line with expectations, and the rating for increasing holdings was maintained. In the first quarter of 2024, the company achieved revenue of 49.75 billion yuan, an increase of 24.5% over the previous year, and realized net profit of 2.22 billion yuan to mother, a decrease of 18.3% over the previous year.

Maintain the 2024-2026 EPS at 0.95/1.01/1.10 yuan, respectively. In view of the current local auction market and financing environment, it is beneficial to central state-owned enterprises and maintain the target price of 12.8 yuan.

Although profit margins declined year over year, they have picked up compared to 2023. Affected by the decline in gross margin carried over from the project, although the overall gross margin of Q1 companies fell 3.2 pct year on year in 2024, it increased 2.6 pct to 18.6% compared to 2023. Furthermore, due to the decline in carry-over equity ratio, etc., the net profit margin for Q1 fell 2.3 pct year on year in 2024, but increased 1.0 pct to 4.5% compared to 2023.

Q1 Land investment is cautious, and the land acquisition equity ratio remains above 90%. In the first quarter of 2024, the company obtained 4 projects in Tianjin, Xi'an, and Taiyuan, with a land acquisition amount of 5 billion yuan, a decrease of 73% over the previous year, and a land acquisition area of 590,000 square meters, a decrease of 35% over the previous year. The intensity of land investment fell from 16% in the first quarter of 2023 to 8% in the same period of 2024, proving that during the market downturn, the company's investment strength was also weakening. Furthermore, the company's land-acquisition equity ratio remains above 90%.

In 2024, the overall pace of construction accelerated, and the asset turnover rate accelerated. The company achieved 2.83 million square meters of new construction in the first quarter, accounting for 16% of the annual commencement plan (10% for the same period in 2023); 5.42 million square meters of completed construction, accounting for 16% of the annual completion plan (12% for the same period in 2023). Completion plans for the full year of 2024 were reduced by 16%, and plans for new starts increased by 21%.

Risk warning: Sales have declined; loss calculations due to falling inventory prices have increased dramatically.