Key points of investment:
24H1 core net profit was -5% year-on-year, and net profit attributable to mother was -25% year-on-year, slightly lower than expected. Recurring business contributed 51% of core profit. According to the company announcement, 24H1's operating income was 79.1 billion yuan, +8.4% year on year; net profit to mother was 10.3 billion yuan, -25.4% year on year; core net profit was 10.7 billion yuan, -4.7% year on year, of which recurring business contributed 51.4%, +8.6pct year on year; basic income per share was 1.44 yuan, -25.4% year over year. Real estate settlement revenue was 59.1 billion yuan, +8.3% year over year; real estate settlement area was 3.45 million square meters, -9.6% year over year. Gross profit margin, net profit margin, and core net interest rate were 22.3%, 13.0%, and 13.5%, respectively; year-on-year, -3.4pct, -5.9pct, and -2.0pct, respectively; real estate settlement gross margin was 12.4%, -4.6pct; three-fee rate was 6.9%, -1.1pct, among which sales, management, and finance rates were -0.2pct, -0.8pct, and -0.1pct; investment income of 1.4 billion yuan, -26.9% year-on-year; change in IP fair value 3.5 billion yuan, -4.9% year over year; contract debt at the end of 24H1 was 286.7 billion yuan, -10.1% year over year, covering 1.35 times real estate settlement revenue in 23 years. In addition, the company plans to pay an interim dividend of 0.2 yuan per share, +1.0% year over year, corresponding to a dividend ratio of 13% (accounting for core net profit).
24H1's sales were 124.7 billion yuan, -27% year over year, and the land acquisition/sales ratio was 21%. 24H1's sales amount was 124.7 billion yuan, -26.7%; equity ratio was 69%, year-on-year - 5pct; sales area was 5.21 million square meters, -25.7% year over year; average sales price was 0.0239 million yuan/square meter, -1.4% year over year. 24H1's land acquisition area was 2.02 million square meters, -75%; the land acquisition amount was 25.6 billion yuan, -76%; the land acquisition/sales amount ratio and area ratio were 21% and 39%, respectively, and the average land acquisition/sales price ratio was 53%, mainly due to the land acquisition focus on core cities such as Beijing. At the end of 24H1, the company developed and sold 47.71 million square meters of soil storage, of which the first and second tier accounts for 71%, and about 67% of the soil storage value consists of newly acquired projects in 2021 and after; IP soil storage is 9.28 million square meters, of which shopping centers account for 73%.
Retail sales of 24H1 shopping malls were +22% year over year, and operating revenue was 11.5 billion yuan, +7% year over year. 1) In terms of shopping malls, 24H1 has opened 82 units (24H1 opened 6 new buildings); retail sales of the mall were 91.6 billion yuan, +21.9% year-on-year, and +7.5% compared to the same store.
24H1 rental fee of 9.5 billion yuan, +9.7% year on year; rental ratio 12.5%, reasonable level; rental rate 97.3%, +0.8 pct year on year; gross profit margin 78%, +0.6 pct year on year; 24H1EBITDA return rate 9.7%. 2) In terms of office buildings, 24H1 rent is 0.95 billion yuan, -4.9% year on year; gross profit margin is 74.8%, -2.3 pct year on year; occupancy rate is 75%, and the annual EBITDA return is expected to be 6.1%. 3) In terms of hotels, 24H1 revenue was 1.04 billion yuan, -3.8%; gross profit margin was 11.7%, -7.0 pct; occupancy rate was 62.5%, -1.4pct year on year. Overall, the company's 24H1 IP rent totaled 11.5 billion yuan, +7% year-on-year.
The three red lines are steady in the green zone, with new low financing costs and obvious capital advantages, helping the company to buck the trend and expand. By the end of 24H1, the company was in the three red and green lines. We calculated a pre-debt ratio of 57.5%, a net debt ratio of only 34.0%, 1.5 times the short-term cash debt ratio; interest-bearing debt of 251.1 billion yuan, +4.8% compared with the same period; financing costs were 3.24%, compared to the end of 23 years - 32 bps; the interest-bearing debt period was 6.5 years, at a high level in the industry, and the financial advantage was obvious. The share of non-RMB net debt exposure was 2.0%, compared to 2.4 pct at the end of '23, and the financing structure continues to be optimized. By the end of 24H1, the company had sold an outstanding amount of 321.4 billion yuan, covering 1.5 times the real estate settlement amount in 23 years, to help release future performance.
Investment analysis opinion: Core performance declined slightly, operating business developed steadily, and maintained a “buy” rating. Backed by China Resources Group, China Resources Land is an industry-leading urban investment and development operator. The company adheres to the “2+X” business model, where IP comprehensive strength is leading in the country. At the same time, the company's finances are stable in the green zone, and financing costs are at one of the lowest levels in the industry. The capital advantage is obvious, helping the company to buck the trend and expand. Considering the current pressure on industry sales, we lowered the company's 24-26 profit forecast to 28.1/29.4/32.3 billion yuan (previously 32.3/34.1/37.5 billion yuan), respectively. The current price corresponds to the 24-year PE4.8X, maintaining the “buy” rating.
Risk warning: Real estate regulations have been tightened beyond expectations, sales elimination rates have fallen short of expectations, and mergers and acquisitions have fallen short of expectations.