Incident: China Resources Land announced its 2024 interim results. In the first half of '24, the company achieved main business revenue of 79.13 billion yuan (yoy +8.4%); realized a net profit of 10.25 billion yuan; and plans to declare an interim dividend of 0.20 yuan/share for 24.
Sales have stabilized their leading position, and gross margin is pressured by the market. In the first half of '24, the company's development and sales business revenue was 59.13 billion yuan (yoy +8.3%). Affected by the market, the gross margin of the company's development and sales business was -4.6pct year-on-year to 12.4%, and development profitability was temporarily under pressure. In the first half of the year, the company achieved a total contract amount of 124.7 billion yuan (yoy -26.7%); achieved a contract area of 5.21 million square meters (yoy -25.7%), maintained the fourth largest contract amount in the industry and maintained the leading position, with the market share ranking in the top 5 in 20 cities.
The operating business is developing steadily and is deeply involved in the commercial market in core cities. In the first half of '24, the rental revenue of the company's shopping centers reached 9.48 billion yuan (yoy +9.7%), and its 82 active shopping malls achieved retail sales of 91.62 billion yuan (yoy +21.9%). The retail sales of 69 shopping malls ranked in the top three in the region. 6 shopping malls opened in high quality as scheduled, with a comprehensive occupancy rate of 97.8% (yoy+1.1pct). Two new shopping center plots were acquired in Beijing and Dalian, implementing a business strategy deeply cultivated in the core cities. In the first half of the year, the gross margin of the company's operating real estate business reached 71.5% (yoy+0.2pct), and profitability remained high.
Rate control has achieved remarkable results, and the financial situation continues to be stable. In the first half of '24, the company's sales and marketing expenses were 2.74 billion yuan, accounting for 3.5% of revenue (yoy-0.1pct); general administrative expenses were 1.84 billion yuan, accounting for 2.3% (yoy-0.8pct) of revenue, with remarkable rate control results. By the end of June '24, the company's interest-bearing debt due within one year accounted for 26%, while capital costs remained at the lowest level in the industry. The weighted average financing cost was about 3.24%, down 32BP from the end of '23.
Profit forecasting and valuation. The company places equal emphasis on development and operation services, has achieved remarkable results in rate control, and has maintained steady financial stability. We expect the company to achieve operating income of 275.02, 295.43, and 310.12 billion yuan in 2024-2026; net profit to mother of 26.87, 29.14, and 30.93 billion yuan, respectively. The corresponding PE is 5.9x, 5.5x, and 5.1x, respectively, maintaining the “recommended” rating.
Risk warning: The real estate market continues to be sluggish; policy implementation falls short of expectations; rate control is not effective.