Brief performance review

On April 29, 2024, the company disclosed its 2024 quarterly report. It achieved revenue of 7.0 billion yuan in the first quarter, or -41.5% year-on-year; realized net profit of 350 million yuan, or -35.3% year-on-year.

Management analysis

The scale of carry-over fluctuated, and both revenue and profit declined year on year: The year-on-year decline in the company's revenue in 1Q24 was mainly due to a year-on-year decrease in the delivery and carry-over scale of real estate projects in the current period. The decline in net profit to mother was slightly less than revenue, mainly due to: ① 1Q24's gross profit margin of 15.09%, a year-on-year decrease of 2.03 pct; ② the increase in investment income contributed by joint ventures, and net investment income of 272 million yuan in 1Q24, an increase of 136 million yuan over the previous year.

Supply affects sales, and land acquisition focuses on first-tier cities: in 1Q24, the company achieved sales amount of 20.4 billion yuan, -59% year over year, sales area 685,000 square meters, -58% year over year, mainly affected by the pace of supply. 1Q24 acquired 2 parcels of land, all located in first-tier cities, 1 in Shanghai and 1 in Guangzhou, with a total construction area of 37,000 square meters.

The project is running well, with a year-on-year increase in construction: in 1Q24, the company started 400,000 square meters of construction, +164% year on year, and 1.29 million square meters of completed area, +94% year on year; by the end of March 2024, the company's construction area was 11.42 million square meters, a decrease of 470,000 square meters from the end of 2023.

Profit forecasting

The company's investment focuses on first-tier cities, and the foundation of the Yangtze River Delta region is stable. With the carry-over of high-quality projects in the future, performance is expected to resume growth. We kept the company's profit forecast unchanged. The net profit forecast for 2024-26 was RMB 2.01 billion, RMB 2.26 billion and RMB 2.56 billion, respectively, with growth rates of 9.4%, 12.2%, and 13.5% respectively. The current price of the company's stock corresponds to the 2024-26 PE valuation of 8.9/8.0/7.0 times, maintaining a “buy” rating.

Risk warning

The implementation of the policy fell short of expectations, the market continued to be sluggish, and the ban on restricted stocks was lifted.