Incident: C&D International Group announced its 2024 interim results. In the first half of '24, the company achieved revenue of 32.75 billion yuan (yoy +34.5%); net profit to mother of 0.82 billion yuan (yoy -36.4%).

Revenue is growing steadily, and profitability is under pressure. In the first half of the year, the company achieved revenue of 32.75 billion yuan (yoy +34.5%), of which development revenue reached 31.01 billion yuan (yoy +36.4%), and the delivered property area reached 2.052 million square meters, an increase of 0.252 million square meters over the same period last year; achieved gross profit margin of 11.92% (yoy-3.33pct), mainly due to the succession of some high land price projects; achieved net profit of 0.82 billion yuan (yoy -36.4%) to mother The main reason for the decline in parent net profit was the impact of minority shareholders' profit and loss (net profit increased slightly compared to the same period last year).

Soil reserves are abundant, mainly concentrated in Hangzhou, Shanghai, and Xiamen. In the first half of the year, the company achieved equity sales of 50.87 billion yuan (yoy -31.9%) and achieved equity sales area of 2.459 million square meters (yoy -26.3%). As of mid-24, the company had a total of 334 projects in China, with land storage of about 14.448 million square meters. The top three heavy warehouse cities were Hangzhou (1.379 million square meters), Shanghai (0.92 million square meters), and Xiamen (0.846 million square meters). Heavy warehouse cities have good fundamentals and are guaranteed for removal.

Financing costs have declined, and liquidity conditions are good. The company's total borrowing cost decreased to 1.59 billion yuan in the first half of the year (2.04 billion yuan in the same period last year). The main reason was the decline in average financing interest rates and the debt structure remained stable. As of mid-year 24, the company's net debt-to-equity ratio was 45.7%. At the same time, the company had plenty of cash on hand, with a total of 49.22 billion yuan in bank and cash on hand as of mid-year 24.

Profit forecasting and valuation. The company has abundant land reserves, focuses on core cities, continues to decline in financing costs, and has abundant working capital. We expect the company to achieve operating income of 180.55, 204.24, and 226.73 billion yuan respectively in 2024-2026; net profit to mother is 4.66, 4.95, and 5.42 billion yuan respectively, corresponding PE is 4.99x, 4.69x, and 4.29x, respectively, covered for the first time, giving it a “recommended” rating.

Risk warning: Real estate continues to be sluggish; policy implementation falls short of expectations; project implementation falls short of expectations