Greentown China released its 2024 semi-annual report. The company achieved revenue of 69.56 billion yuan in the first half of 2024, +22.1% year-on-year, and shareholders' share profit of 2.05 billion, or -19.6% year-on-year. Shareholders' core net profit was 4.95 billion, +27.5% YoY.

Revenue reached a new high, and profits remained stable

According to the 2024 semi-annual report, the company achieved revenue of 69.56 billion, +22.1% year-on-year, and profit attributable to shareholders of 2.05 billion, or -19.

6% Shareholders' core net profit was 4.95 billion, +27.5% YoY. The lower profit growth rate of the company is mainly due to the decline in real estate market sentiment, on the one hand, the company's gross settlement margin was 13.09%, down 4.32 pct from the same period last year; on the other hand, based on prudential considerations, the company's accrued asset impairment losses of 1.75 billion, a significant increase from 0.46 billion in the same period in 2023. Overall, the company's operations have remained steady, and the core net profit attributable to shareholders has maintained a high growth rate. We expect that with the continued relaxation of industry policies, the company's profit margin is expected to rise steadily in the future, driving overall profit to a new high while revenue continues to rise.

Sales remain resilient, and land acquisition focuses on high-energy cities

In the first half of 2024, the company achieved sales volume of 126.5 billion yuan, -5.7% year-on-year, with a sales area of 5.91 million square meters, or -2.2%. Against the backdrop of a significant decline in the sales scale of the industry, the company's sales performance was significantly better than the industry. At the same time, the sales ranking continued to rise, ranking third in the country. As of 2024H1, the company added 15 new projects throughout the year, with a total construction area of about 1.31 million square meters, of which core second-tier cities accounted for 94% of the new value. The projects were mainly focused on Hangzhou, Xi'an, Suzhou, Ningbo, and Hefei. The company actively focused on core cities, and the investment side maintained a high degree of prudence to ensure the safety of the land acquisition structure. Furthermore, the company's average equity ratio further increased to 84% in the first half of the year, strengthening the guarantee of future performance.

Reduced financing costs and reasonable debt structure

The company's financing channels are smooth. At the end of June 2024, while the prices of domestic bonds and overseas bonds remained high, the company's average borrowing cost was 4%, a further decline from 4.4% in the same period last year, and financing costs continued to be optimized. By the end of June 2024, the company's debt maturing within one year accounted for 23.8% of the total debt, remaining low. At the same time, the company completed the issuance of RMB 5.134 billion bonds and completed the replacement of overseas USD 0.817 billion bonds. Overall, the company's debt structure is steady, and the pace of financing is reasonable.

Investment advice: Greentown's Chinese shareholders have a high background, and their performance and sales have maintained a certain degree of resilience during the downturn of the industry. Investors gather in core cities. We are optimistic that the company will continue to win market favor with high quality in the stock era. We predict that the company's 2024-2026 EPS will be 1.36, 1.43, and 1.48 yuan/share, respectively. Considering that the company's current valuation level is low and its operating performance is significantly better than the industry average, the company's rating will be raised to a “buy” rating.

Risk warning: The downturn in the real estate industry exceeds expectations, and the citation data is lagging or untimely.