Matters:
The company announced its 2024 quarterly report. In the first quarter, it achieved operating income of 49.75 billion yuan, an increase of 24.5% year on year, and net profit to mother of 2.22 billion yuan, a year-on-year decrease of 18.3%.
Ping An's point of view:
Profit was under pressure due to a decline in carry-over gross margin and equity ratio: in the first quarter of 2024, the company achieved operating income of 49.75 billion yuan, an increase of 24.5% year on year, and net profit to mother of 2.22 billion yuan, down 18.3% year on year. The main reasons for the growth rate of net profit to mother was lower than revenue: 1) gross margin fell 3.2 percentage points to 18.6% year on year; 2) minority shareholders' share of profit and loss increased 12.8 percentage points year on year to 44.2%.
The contract debt at the end of the first quarter was 377.43 billion yuan, 1.1 times the revenue of the past year, and the outstanding resources were relatively sufficient.
Focus on sales repayments and continue to focus on investment: in the first quarter of 2024, the company achieved a contract amount of 62.98 billion yuan, a year-on-year decrease of 44.8%, a contract area of 3.669 million square meters, a year-on-year decrease of 41.8%; achieved a sales return of 57.65 billion yuan, with a comprehensive return rate of 91.5%. There are 4 new real estate expansion projects, adding 590,000 square meters of floor area, with a total acquisition cost of 5 billion yuan. All are located in 38 core cities. 2.83 million square meters of new construction were started in the first quarter, an increase of 42.9% over the previous year; 635 proposed projects were under construction at the end of the period, with an area of 81.5 million square meters under construction and an area of 57.58 million square meters to be developed.
Investment advice: Maintaining the original forecast, the company's EPS for 2024-2026 is expected to be 1.12, 1.23 yuan, and 1.35 yuan, respectively. The current stock price corresponding to PE is 8.3 times, 7.5 times, and 6.9 times, respectively. The company is focusing on the return of capital, continuously reducing financing costs, focusing on leading sales expansion, and a clear trend of share increase under industry pattern optimization, maintaining a “recommended” rating.
Risk warning: 1) Property market repair falls short of expectations Risk: If subsequent buyers lack confidence and property market restoration falls short of expectations, it will have a negative impact on the company's development; 2) Probability of core city land acquisition is reduced risk: Under the convergence of land acquisition strategies, competition for core land in core cities is intense, making it more difficult to obtain land or the risk that the company will not be able to obtain high-quality land storage; 3) risks such as slow profitability repair and continuous depreciation.