Core views

In the first half of 2024, the company achieved revenue of 32.7 billion yuan, a year-on-year increase of 34.5%, and realized net profit to mother of 0.82 billion yuan, a year-on-year decrease of 36.4%. The company's revenue growth rate is higher than the performance growth rate mainly due to the decline in gross margin and the increase in minority shareholders' profit and loss share. In the first half of 2024, the company achieved sales volume of 66 billion yuan, a year-on-year decrease of 29.9%. The sales ranking was seventh in the country, one place higher than in 2023. The sales ranking has continued to rise in recent years, and the company's sales amount ranked in the top ten in 46 cities. In the first half of 2024, the company acquired 42 billion yuan of land, added a value of 74.2 billion yuan, and maintained a high level of land acquisition intensity of 63.6%. As of the end of June 2024, the company's land storage area was 14.45 million square meters, with an inventory value of 257.7 billion yuan, of which Tier 1 and 2 cities accounted for 83%, and 77% of the land acquired in 2022 and beyond. The soil storage structure was excellent.

occurrences

The company announced its 2024 interim results, achieving revenue of 32.7 billion yuan, a year-on-year increase of 34.5%, and net profit to mother of 0.82 billion yuan, a year-on-year decrease of 36.4%.

Brief review

Performance declined due to the downturn in the industry. In the first half of 2024, the company achieved revenue of 32.7 billion yuan, a year-on-year increase of 34.5%, and realized net profit to mother of 0.82 billion yuan, a year-on-year decrease of 36.4%.

The company's revenue growth rate was higher than the performance growth rate mainly due to: 1) achieving a gross profit margin of 11.9% in the first half of 2024, down 3.3 percentage points from the same period last year; 2) minority shareholders' profit and loss in the first half of 2024 accounted for 43.1%, up 33.5 percentage points from the same period last year. It is worth noting that in the first half of 2024, the company's gross margin increased by 0.8 percentage points compared to the full year of 2023. With the optimization of the carry-over structure, the gross margin for the whole year is expected to increase.

Sales rankings continue to improve, and we insist on deepening our core cities. In the first half of 2024, the company achieved sales volume of 66 billion yuan, a year-on-year decrease of 29.9%. The sales ranking was seventh in the country, one place higher than in 2023, and the sales ranking has continued to rise in recent years. The repayment amount for the first half of the year was 64.7 billion yuan, with a repayment rate of 98.0%. The company continues to cultivate core cities. In the first half of 2024, it ranked in the top ten in 46 cities, of which 13 cities ranked first.

The investment focuses on core cities, and the soil storage structure is excellent. In the first half of 2024, the company acquired 42 billion yuan of land, with an additional value of 74.2 billion yuan. The intensity of land acquisition was 63.6%, down 9.1 percentage points from the same period last year, but it remained at a high level. The company's investment mainly focuses on core Tier 1 and 2 cities with a good brand base. The top five cities that acquired land in the first half of the year were Hangzhou, Xiamen, Fuzhou, Chengdu, and Wuhan. The five cities added 67.8 billion yuan in value, accounting for 91.4% of the total value added. As of the end of June 2024, the company's land storage area was 14.45 million square meters, with an inventory value of 257.7 billion yuan, of which Tier 1 and 2 cities accounted for 83%, and 77% of the land acquired in 2022 and beyond. The soil storage structure was excellent.

The profit forecast and target price were lowered, and the buying rating was maintained. We forecast the company's 2024-2026 EPS to be 2.56/2.67/3.15 yuan (the original forecast was 2.66/2.99/3.54 yuan). The company insists on deepening its core cities, continues to rise in sales rankings, and maintains a high level of intensity in land acquisition. It is expected to stand out from the changes in the industry pattern. Referring to comparable company valuations, the target price was lowered to HK$18.59 (RMB to HKD exchange rate 1:1.09) to maintain the purchase rating.

Risk warning: 1. In terms of sales, the current market is still declining. The company maintained a high level of land acquisition intensity in the early stages. If the fundamentals of the layout city deteriorate beyond expectations, the expected price at the time of land acquisition may not be achieved, which will further affect subsequent performance. 2. In terms of layout, the company's land acquisition layout is concentrated in the Haixi region, especially in Fujian Province. Although as the company's base, the company has local advantages with its high-quality products and brand awareness, relying too much on a single market will make it impossible to spread the risks. In the future, we need to continue to monitor the situation in the Fujian market. 3. In terms of carry-over, the company currently has sufficient carry-over resources, but the progress of the project varies. If delivery is delayed in some cities, it may cause the company's carry-over to fall short of expectations, which in turn affects the company's revenue and profit realization.