Key points of investment
Comprehensive real estate developers with a central enterprise background promote development through strategic upgrades. As a leading comprehensive real estate developer in China, the company has established a “3+1” business model of “development and sales business+operational real estate business+light asset management business+ecosystem factor business”. Backed by the parent company of a central enterprise, the equity structure is stable. The core management are all industry veterans and experienced.
Development business: Focus on high-energy cities, and are relatively active in land acquisition. The sales scale has been in the top five since 2022, with the first and second tier accounting for 90%. 2013-2023 sales grew at an average annual rate of 16.6%. The 2023 sales target completion rate is 102.3%, which is higher than the average of 89.5% for typical housing enterprises. The market share increased from 1.8% in 2020 to 2.6% in 2023. The share of first-tier and second-tier sales rose from 84% in 2019 to 91% in 2023. Lay out high-energy cities and acquire land intensively in a countercyclical manner. In 2023, 68 new projects were obtained, and the intensity of land acquisition was 58%, which is a significant increase over the past three years, and is far ahead of the sample housing enterprises.
Judging from the amount of land acquired by the company in 2023, Tier 1 and 2 accounts for 93%. The soil reserves are abundant, the structure is reasonable, and the focus is on core cities. In 2019-2023, the company's soil storage remained above 60 million square meters. Of the land storage development and sales business in 2023, line 1 and 2 accounts for 73%; in soil storage for investment properties, line 1 and 2 accounts for 78%.
Operational business: Across the cycle, the return is stable. Operational real estate: 20 years of intensive development, with shopping malls as the core business format. Build three differentiated product lines: Vientiane City, Vientiane Hui, and Vientiane Tiandi, and deeply cultivate different levels and business districts. The occupancy rate reached 96.5% in 2023. Deeply involved in Tier 1 and 2 and provincial capitals, the number of the top three shopping malls in each city increased to 61 in 2023, and 41 new shopping malls are planned to be opened in 2024-2027. First-mover advantage and brand cooperation build competitive barriers for the company's luxury projects, ranking first in the country in terms of the number of luxury projects. Property management business: The business contribution is growing rapidly, and the management area continues to increase. Vientiane Life's performance was strong, and gross margin rose to a high level of 31.8%. The area under management continued to expand, rising to ninth place in the industry. Geographic ecosystem: The ecosystem business represented by construction, contract construction, long-term rental apartments, and industrial real estate is growing steadily.
Asset management business: Shifting to a major asset management business to create a second curve of performance growth. High quality underlying asset endorsement, first batch of consumer REITs launched. Using Qingdao Vientiane City as the underlying asset, the company raised 6.92 billion yuan in initial consumer REITs. Lower-level asset management parties seek steady progress, and China Resources Youchao REIT leads the way in guaranteed housing REITs. The asset management platform was initially built, holding many high-quality assets, and there is plenty of room for REITs to expand. The company has more than 20 quasi-assets that meet REITs issuance standards.
The financing cost is low, the debt structure is healthy, and the credit advantage is obvious. For example, in 2023, the company's weighted average financing cost fell 19BP to 3.56%, hitting a record low in nearly ten years, and remained at the lowest level in the industry; only 29% of interest-bearing debt matured between 2024-2025; the rest were long-term interest-bearing liabilities.
Profit prediction and investment rating: The company's central enterprise background endowment advantage; the real estate development business focuses on high-energy cities, and the attitude of land acquisition is positive; the asset management business is transforming into a large-scale asset management business and seeking steady progress; overall, future performance is highly certain. Net profit due to mother for 2024, 2025, and 2026 is estimated to be 319.5, 341.0, and 35.98 billion yuan, corresponding EPS of 4.48, 4.78, and 5.05 yuan/share, respectively. We selected 6 representative housing enterprises with a national central enterprise background and a national layout in the industry for valuation. Based on the valuation situation of comparable companies, we gave the company a PE valuation of 8.1X in 2024, corresponding to a price of 39.4 HKD/share per share, which covered the “buy” rating for the first time.
Risk warning: The downward pressure on the industry has exceeded expectations; the relaxation of regulatory policies has fallen short of expectations, and the tightening has exceeded expectations.