Description of the event
In 2023, the company's revenue was 36.78 billion (-7.1%), net profit attributable to mother was 1.47 billion (same period last year - $2.88 billion), net profit after deduction of 3.76 billion yuan (same period last year - $2.95 billion), and comprehensive gross profit margin of 26.5% (+2.4pct). 2024Q1 returns results to mother - 93.76 million yuan.
Incident comments
Reduced settlement resources led to a decline in revenue, and impairment dragged down parent performance. In 2023, the company's revenue was 36.78 billion (-7.1%), including development revenue of 29.04 billion yuan (-13.3%), self-owned business revenue of 5.39 billion yuan (+24.4%), and hotel revenue of 970 million (+75.1%). The decline in revenue was mainly due to a decrease in the settlement scale of the development business. Net profit loss to mother was 1.47 billion, mainly due to an accrued impairment of 4.61 billion yuan (1.57 billion yuan last year). In addition, the year-on-year increase in the expense ratio of 2.2 pct to 14.7% during the period also dragged down performance to a certain extent. Even if the comprehensive gross margin increased by 2.4 pct to 26.5% and achieved a net investment income of 4.59 billion yuan (loss of 2.16 billion dollars in the same period last year) by disposing of long-term equity investments, it is still difficult to make up for the pressure of the company's loss in performance. Net profit after deducting non-current assets in 2023 was $3.76 billion (same period last year - $2.95 billion). The increase in performance loss after deduction was mainly due to non-recurring profit and loss due to disposal of illiquid assets. 2024Q1's return to parent revenue was -93.76 million yuan. By the end of 2023, the company's accounts had an advance payment of 31.99 billion yuan (+3.8%), and the advance account/2023 development business revenue = 1.1X, effectively guaranteeing post-settlement revenue. Looking ahead to the later stages, revenue remains steady, but gross margin is under pressure, depreciation pressure remains due to weak demand, and further efforts are needed to improve performance.
Sales and investment are prudent, and the shopping center business is developing steadily. In 2023, the company had full-caliber sales of 46.1 billion yuan (-18.8%), sales volume (-1.8%) and price (-17.4%) fell sharply, ranking 29th in the industry (up 4 places from 2022). In 2023, the company obtained a total of 3 projects, located in Nanjing, Xi'an and Shanghai, with a full-caliber land acquisition amount of 6.33 billion yuan (-34.0%) and a floor price of 38,000 yuan/square meter (+211.3%). The main reason for the significant increase in floor slab prices was the high energy level of the layout city, with an average premium rate of 1%.
Land acquisition intensity in terms of amount and area decreased by 3.2 pct and 27.4 pct to 13.7% and 7.5%, respectively. In an environment where sales continued to be sluggish and the margins of the capital chain became tighter, the company's land acquisition investment continued to weaken. By the end of 2023, the company can sell goods worth 152.6 billion yuan, with sufficient land reserves to guarantee later sales. The company's shopping center business is developing steadily. By the end of 2023, there were 45 commercial projects nationwide (30 heavy assets+15 light assets), 34 active projects (including light assets and non-standardized products), with a total commercial area of 3.74 million square meters, including 21 Joy City shopping centers (including light assets) and 2 Dayue Exchange. In 2023, the company's shopping center had sales of 34.7 billion dollars (+37%); the number of visitors exceeded 300 million (+66%), and the average occupancy rate was 95%.
Interest-bearing debt and financing costs have declined, and the share of short-term debt has increased. As of the end of 2023, the company's interest-bearing debt balance was 73.51 billion yuan (-3.8%), and the debt size declined slightly. Among them, the share of short-term debt increased by 13.6 pct to 29.8%, and short-term debt repayment pressure increased. The cost of comprehensive financing decreased by 0.2 pct to 4.61% year on year, and financing costs continued to decline. Looking at the three red line indicators, the net debt ratio decreased by 5.1 pct to 91.6% year on year, the balance ratio excluding advance payments increased 0.3 pct to 72.2% year on year, the short-term cash debt ratio decreased by 0.88 to 1.4X year on year, and the margin of capital chain tightened.
Investment advice: Revenue and impairment are dragging down performance, and further efforts are needed to improve. The company responded to the call, revitalized assets, and actively transferred self-owned properties in core locations in core cities such as Shanghai and Beijing. However, against the backdrop of continued sluggish sales in the industry, further efforts are needed to improve the company's operations and performance. The company's 2024-2026 net profit is predicted to be 1.2/1.8/280 million yuan, and the 2025-2026 performance growth rate is 55% and 53%, giving it an “increase in wealth” rating.
Risk warning
1. Sales continued to be weak, and the company's sales and cash flow repayments fell short of expectations; 2. Gross margin declined, and inventory depreciation dragged down performance.