Core views:
Revenue declined, profit loss, and internal and external profitability declined. According to the company's quarterly report, in the first quarter of '24, Vanke achieved operating income of 61.59 billion yuan, a year-on-year decrease of 10%, net profit of 330 million yuan, a year-on-year decrease of 88%, and a net loss attributable to the parent company of 360 million yuan (23Q1 was 1.45 billion yuan). The slowdown in the pace of completion and settlement, and the decline in internal and external scale and profitability were the main reasons for the company's Q1 losses. Subsequent asset disposal increased investment income or helped repair the company's performance to a certain extent.
The commencement of land acquisition has slowed, and sales have followed market fluctuations. In terms of sales, 24Q10 Wanke achieved sales volume of 58 billion yuan, a year-on-year decrease of 43%. Due to the scale of land acquisition in the early stages and recent construction level (24Q1 acquisition of 1.8 billion yuan, 3% of land acquisition efforts, 1.7 million square meters, year-on-year ratio), there is still some pressure on the company's future sales scale. Judging from the sales pace, 24Q1 was influenced by the market and itself. In January-January, Vanke's monthly sales were around 16 billion yuan, while sales returned to more than 24 billion dollars in March. The subsequent market situation and the company's sales situation are worth continuing to pay attention to.
The total amount of debt has stabilized, and the share of short-term debt has increased. As of 24Q10, Vanke's interest-bearing debt was 324 billion yuan, which was basically the same as at the end of '23. Of these, short-term debt was 84.2 billion yuan, which was roughly equivalent to the amount of cash on hand, and the company's debt repayment pressure increased. The company mentioned in its '23 annual report that in '24, the company plans to achieve a transaction repayment of no less than 30 billion yuan by disposing of large assets. This portion of capital will become an important source of debt repayment for the company, and keep an eye on the company's asset disposal plans and progress in the future.
Profit forecasting and investment advice. The estimated net profit for 24-25 will be 10.9 billion yuan and 10.9 billion yuan respectively, -10.2% and -0.2% year-on-year, corresponding to PE of 8.1x and 8.1x. Maintaining a reasonable valuation of 0.5 times the company's net assets at the end of '23, corresponding to a reasonable value of 10.51 yuan/share for A shares, taking into account exchange rates and AH premium factors, corresponding to HK$9.82 per share for H shares, all maintaining a “buy” rating.
Risk warning. The improvements fell short of expectations, including policy improvements, the sustainability of residents' demand falling short of expectations, etc.; supply-side clean-up disrupted market sentiment; settlement scale and profit margins fell short of expectations.