Event: The company announced results for the full year of 2023 and 2024Q1. Throughout 2023, the company achieved revenue of 11.53 billion yuan (yoy +9.2%), achieving net profit of 390 million yuan; with 2024Q1, the company achieved revenue of 350 million yuan (yoy -89.0%), and net profit to mother of -80 million yuan.
Revenue grew positively year over year in '23, and the results of cost control were remarkable. The company achieved revenue of 11.53 billion yuan (yoy +9.2%) in the full year of 2023. The main reason for the year-on-year increase in revenue was the increase in the average single-party sales price of the company's completed housing delivery projects in the current phase compared to the same period in '22; the company's rate control results were remarkable. Sales/management expenses were -27.5%/-44.2%, respectively, and sales/management rates were -1.1/-1.0pct year-on-year, respectively.
2024Q1 was affected by the year-on-year decrease in the carry-over area of the company's completed housing delivery projects, and the company achieved revenue of 350 million yuan (yoy -89.0%).
Profits are pressured by multiple factors. The company is deeply involved in stable regional fundamentals, and profits are expected to recover. Throughout 2023, the company achieved net profit to mother of -370 million yuan. The main reasons for the net profit to mother changed from positive to negative: ① Affected by structural adjustments in the industry, the gross margin of the company's real estate development business fell 12.7 pct to 13.1% year on year; ② the company's accrued asset impairment losses totaled 670 million yuan for the full year of 2023, and only 100 million yuan for the full year of '22. With 2024Q1, the company achieved net profit of -80 million yuan to mother, and profitability is still under pressure.
The company's land reserves and new investment are focused on the Xi'an base. According to data from third party agencies such as Kerui and Central Plains Real Estate, commercial residential transaction volume and price in Xi'an rose sharply in 2023. The annual commercial residential transaction area was +21%, and the average transaction price was +7%. The overall fundamentals of the real estate market were relatively good. Considering the fundamentals of the company's heavy warehouse area, the company's profits are expected to gradually recover.
The 2024Q1 contract debt level has risen, and it is planned to add additional capacity and construction area for the whole year by +129.5% compared to the same period last year. By the end of 2023, the company's contractual liabilities totaled 9.95 billion yuan, which could cover 0.86 times the 2023 revenue. As of 2024Q1, the company's contract debt was 10.89 billion yuan, +9% compared with the beginning of the year. The company added 223,000 square meters of land planning for the whole of 2023. In 2024, it plans to reserve 510,800 square meters of land planning and construction area through auctions within 12 months after the 2023 shareholders' meeting is held, +229.5% over the same period, to guarantee the company's future settlement revenue.
Sales bucked the trend in '23, and sales were under pressure in the beginning of '24. Throughout 2023, the company achieved contract sales of 11.49 billion yuan (yoy +6.4%) and achieved equity contract sales of 10.01 billion yuan (yoy +9.7%). With the steady fundamentals of the layout city and good regional reputation, the company bucked the trend and achieved positive year-on-year growth. With 2024Q1, the company achieved a contract sales amount of 1.55 billion yuan (yoy -40.5%) and an equity contract sales amount of 1.41 billion yuan (yoy -31.0%). The company's sales require further project expansion and gradual stabilization of the industry.
Profit forecasting and valuation: The company is deeply involved in stable regional fundamentals, remarkable rate control results, and profits are expected to be gradually recovered. We need to pay attention to the company's subsequent project development. We expect the company's 24-26 revenue to be 115.6, 117.0, and 11.88 billion yuan, respectively, and net profit to mother of 3.1, 3.4, and 380 million yuan, corresponding PE of 7.3, 6.7, and 6.0 times, respectively, maintaining the “recommended” rating.
Risk warning: The real estate market continues to be sluggish; policy implementation falls short of expectations; rate control is not effective.