Key points of investment:

24H1's revenue was +34.5% YoY, and net profit to mother was -36.4% YoY. Performance declined and fell short of expectations. The company announced results for the first half of 2024, 2024H1, and the company achieved revenue of 32.75 billion yuan, or +34.5%; by business, the property development business achieved revenue of 31 billion yuan, +36.4%, accounting for 94.7% of total revenue; gross profit of 14.92 billion yuan, +5.1%; net profit of 1.44 billion yuan, +1.0% year on year; net profit of 0.82 billion yuan, lower than expected; basically per share Earnings were 0.47 yuan, or -40.9% YoY. The company's revenue grew rapidly, mainly due to a marked increase in the pace of real estate delivery; however, the profit margin declined significantly. The company's 24H1 gross profit margin was 11.9%, -3.3 pct year on year; net profit margin was 2.5%, -2.8 pct year on year; the total period rate (sales, management, finance rate) was 8.0%, -1.4 pct year on year, of which the management expense ratio was 2.8% and +0.7% year over year, due to inventory impairment. Furthermore, the profit and loss of the company's minority shareholders was 0.62 billion yuan, +350% year over year, due to the low equity ratio of the company's carry-over projects. By the end of 24H1, the company's outstanding sales amount reached 231.7 billion yuan, +11% compared to the end of 23, covering 1.7 times the revenue for 23 years. Judging from the structure, the company's land acquisition projects in '22 and thereafter had sold 174.2 billion yuan outstanding, accounting for 75%, and the inventory structure was healthy.

24H1 sales volume was -30% year-on-year, land acquisition intensity reached 64%, and the industry ranking rose steadily in a contrarian environment. According to the company's announcement, 2024H1, the company achieved full-caliber sales of 66 billion yuan, -29.9%; equity sales amount of 50.87 billion yuan, or -31.9% YoY, 77%; equity sales area of 2.459 million square meters, -26.3% YoY; the decline in industry sentiment led to a decline in the company's sales scale. According to Kerry's list, C&D's real estate sales ranked 7th, continuing to rise 1 place from the end of '23; the company's 24H1 sales payback rate was 98%. 24H1 added 14 new plots of high-quality land. The layout was in Hangzhou, Xiamen, Wuhan, Shanghai, Changsha, and Longyan. The land acquisition amount was 42 billion yuan, -39% of the same period, the land acquisition/sales amount ratio was 64%, and the land acquisition value was 74.2 billion yuan, accounting for 97% of the first and second tier. By the end of 24H1, the saleable area of the company's land storage was 14.45 million square meters, with an equity ratio of 77%; the saleable value was 257.7 billion yuan, of which the first and second tier accounts for 83%. The company still has subsequent requests for soil storage; judging from the structure, the company acquired new land and storage accounts for 77% after 22 years.

The three red lines remain green, and financing costs have reached a record low. According to the company's announcement, 2024H1, after excluding advance payments, the company's balance ratio is 61.1%, net debt ratio is 45.7%, and the short-term cash debt ratio is 5.0 times. The finance remains steady, and the three red lines remain green. Currently, in the context of continued tightening of industry financing, the company's state-owned enterprise background has a clear financing advantage. At the end of the reporting period, weighted financing costs were 3.65%, down 0.10pct from the end of '23, and financing costs continued to be optimized.

Investment analysis opinion: Performance declined, land acquisition was active, capital advantage was obvious, and the “buy” rating was maintained. C&D International Group is rooted in Fujian, adhering to a high-quality key layout. It is a real estate development platform under the Xiamen State-owned Assets Administration Commission, and the management structure is perfect; the sales growth rate is impressive, with both the soundness of state-owned enterprises and the flexibility of private enterprises; currently, the three red lines maintain a green path, and have significant financing advantages, helping to expand against adversity and overtake corners. We believe that the company's future settlement pace will decline, and there is still pressure on the company's inventory depreciation under the downward cycle of the industry, so the company slightly lowered its 24-26 net profit forecast to 5.13, 5.64, and 6.14 billion yuan (the original forecast was 5.55, 6.37, and 6.91 billion yuan). The current price corresponds to the 24/25 PE by 5.1/4.7 times, respectively, maintaining the “buy” rating.

Risk warning: Settlement profit margins declined beyond expectations, and sales elimination rates fell short of expectations.