Description of the event
The company released its 2024 quarterly report. During the reporting period, it achieved revenue of 23.7 billion yuan (+58.2%), net profit to mother of 330 million yuan (+22.2%), and net profit of 290 million yuan (+8.0%) after deduction.
Incident comments
Gross margin increased year-on-year, and performance grew steadily. In the first quarter of 2024, the company's revenue increased significantly (+58.2%), improved overall gross margin (up 1.9 pct to 14.5% year on year), and the period expense ratio decreased (2.6 pct to 5.9% year over year, excluding R&D expenses), but net profit growth rate to mother was significantly less than the year-on-year growth rate, mainly due to a year-on-year decrease in investment income and increase in minority shareholders' share of profit and loss: 1) Investment income of 40 million yuan, a decrease of 230 million yuan; 2) minority shareholders' profit and loss ratio increased to 64.5%, mainly due to a decrease in equity ratio of carry-over projects. The company's revenue guarantee ratio at the end of the first quarter of 2024 (contract debt+advance accounts) /annualized revenue) was 0.93x. Considering the increase in average sales prices in recent years, the company's annual revenue side outlook is expected to be relatively stable, and with the gradual restoration of gross margin (gross margin obtained after the second half of 2021 is higher, and high-margin projects are gradually entering the carry-over cycle), the performance is expected to continue to recover marginally.
The sales scale remains fifth in the industry, and investment continues to focus on core cities. In the first quarter of 2024, the company achieved a contracted sales amount of 44.2 billion yuan, a year-on-year decrease of 44.4%. According to Kerry data, the company's sales volume ranking remained fifth in the industry. The year-on-year decline in sales scale was mainly due to the high base last year and the relatively limited momentum for recovery on the demand side of the industry since this year. In the first quarter of 2024, the company's land acquisition amount was 9.4 billion yuan (+15.3% year over year), and the land acquisition intensity (land acquisition amount/sales amount) was 25%, up 12.8 pct from the previous year. The company obtained 4 parcels of land in Shanghai, Hefei, Chengdu and Nanjing in the first quarter, all located in Tier 1 and 2 cities, and the average land acquisition price increased 8.0% over last year. The land acquisition ratio increased 9.4 pct to 85%, and the quality of land acquisition continued to improve; in recent years, the company has adhered to the “regional focus” and “deep urban cultivation” investment strategy, and “deep urban cultivation” to implement the “effective project” “Five good” standards , project reserves have been replaced in an orderly manner, and the margin of safety is gradually increasing.
The balance sheet continues to be optimized, and the holding business is developing steadily. In 2023, the company actively grasped policy opportunities, successfully issued shares to purchase high-quality assets and raised 8.5 billion yuan of supporting capital to achieve continuous balance sheet optimization. By the end of 2023, the company excluded pre-received balance sheet ratios of 62.4%, 54.6%, and 1.28, respectively, maintaining the “green file” level, while the comprehensive capital cost dropped sharply by 42BP to 3.47% from the beginning of the year. In terms of asset operation, full-caliber asset operating revenue of 6.7 billion yuan (+17.2%) within the company's management range in 2023, the EBITDA return for mature projects (three years or more in operation) reached 6.24%, and the stock value cannot be ignored; in terms of urban services, the accumulated property management area reached 345 million square meters by the end of 2023, and the net profit for 2023 was +20%/+24%, respectively, while actively exploring innovative businesses such as exhibition, cruise ships, and contract construction.
Performance grew steadily, and management remained leading. The company achieved steady growth in the first quarter of 2024, and the subsequent revenue outlook is relatively stable. As gross margin gradually recovers, the performance is expected to continue to recover marginally. In terms of operation, the company's three red lines maintain the “green level” level, maintain the fifth largest sales scale in the industry, continue to focus on core cities, hold business and achieve steady development, and its comprehensive competitive advantage continues to advance. Net profit due to mother for 2024-2026 is estimated to be 74/82/89 billion yuan, and the corresponding price-earnings ratios are 10.6X/9.6X/8.9X, respectively. Although the apparent PE is high, the actual PB is relatively low. The current valuation does not reflect medium- to long-term value and has a large implied space, maintaining a “buy” rating.
Risk warning
1. There is uncertainty about the progress of carry-over gross margin repair;
2. There is uncertainty about the progress of core resource development.