Incident: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 49.749 billion yuan, an increase of 24.51% year on year; net profit to mother was 2,224 billion yuan, down 18.28% year on year.
The decline in gross margin affected performance: the company achieved revenue of 49.749 billion yuan in the first quarter of 2024, an increase of 24.51% year on year; net profit to mother reached 2,224 billion yuan, down 18.28% year on year. The decline in performance was mainly due to: 1) the overall gross margin in Q1 2024 was 18.64%, down 3.23pct from the same period last year; 2) the equity ratio declined. The profit and loss of minority shareholders in 2024 accounted for 43.46% of net profit, up 11.59 pcts from the same period last year. In terms of period expenses, the company's sales expenses rate and management expense ratio for Q1 2024 were 2.30% and 1.93% respectively, down 0.18 pct and 0.46 pct respectively from the same period last year. Both rates decreased.
Sales declined and land acquisition focused on high energy levels: In terms of sales, in 2024, the company achieved a sales area of 36.687 million square meters, a year-on-year decrease of 41.84%; sales amount was 62.984 billion yuan, down 44.81% year-on-year, the highest full-caliber sales amount in the industry; the corresponding average sales price was 17,168 yuan/square meter, down 5.11% year on year. Under overall industry sales pressure, the company's sales volume and price fell. In terms of location, the company added 4 new projects in Q1 2024, located in Tianjin (1), Xi'an (2), and Taiyuan (1), all of which are high-energy cities. A total land storage capacity of 590,000 square meters was added, with a total land price of 5,029 billion yuan and a floor price of 8,501 yuan/square meter. The corresponding land sales ratio was 0.50. The total land value of equity was 4.672 billion yuan, and the corresponding equity ratio was 92.9%. Of these, with the exception of the Taiyuan project, the other 3 projects all acquired 100% of the land, and the company maintained a high equity ratio. In the first quarter of 2024, the company's new construction area was 2.83 million square meters and the completed area was 5.42 million square meters, up 42.9% and 5% year-on-year respectively. Both new construction and completion were better than the overall level of the market. By the end of the first quarter of 2024, the company had a total construction area of 81.5 million square meters and an area to be developed of 57.58 million square meters.
Adequate cash maintenance: The company achieved sales return of 57.651 billion yuan in the first quarter, with a comprehensive return rate of 91.53%. By the end of the first quarter of 2024, the monetary fund balance was 129.554 billion yuan, and cash remained abundant. The company recently successfully issued the third installment of 2024, with a financing scale of 2.5 billion yuan, a coupon interest rate of 2.95%, and a low financing cost, reflecting the company's financing advantages.
Investment advice: The company's revenue growth in Q1 2024 was affected by a decline in gross margin and a reduction in equity ratio, and performance declined. Against the backdrop of overall pressure on the industry, the company's sales volume and price fell in the first quarter of 2024. Land acquisition focuses on the core, and all new projects are core cities. On the financial side, a high comprehensive return rate was achieved in the first quarter. We maintain the company's 2024-2026 net profit forecast of 12.623 billion yuan, 13.105 billion yuan, and 13.429 billion yuan. The corresponding EPS is 1.05 yuan/share, 1.09 yuan/share, 1.12 yuan/share, and the corresponding PE is 8.45X, 8.14X, and 7.94X, maintaining the “recommended” rating.
Risk warning: the risk that the macroeconomy falls short of expectations, the risk of real estate sales falling short of expectations, the risk of a sharp drop in housing prices, the risk of capital falling short of expectations, and the risk of debt payments falling short of expectations.