occurrences

On August 28, 2024, the company announced its 2024 semi-annual results announcement. 1H24 achieved operating income of 35.34 billion yuan, +10.1% year-on-year; realized net profit to mother of 1.83 billion yuan, -15.9% YoY; and an interim dividend of 0.173 yuan per share, with a dividend ratio of 40% (core net profit caliber).

reviews

The decline in gross margin led to a decline in net profit attributable to mother: the company's 1H24 real estate development, property management, and property holding rental income all increased year-on-year, while the main reason for the decline in overall net profit to mother was: due to the downturn in the real estate market, 1H24's gross profit margin was 13.7%, down 4.1 pot year on year, and gross profit fell 15.0% year on year.

A district with consolidated sales advantages, the Guangzhou market topped the list: the company's 1H24 contract sales amount was 55.4 billion yuan, -34% year over year (TOP100 housing enterprises average -42% year over year), ranking 9th in the industry (12th in 2023). 1H24 achieved sales of 26.1 billion yuan in the Greater Bay Area, accounting for 47.1% of the company. Of these, Guangzhou achieved sales of 23.05 billion yuan, accounting for 41.6% of the company. According to data from the China Index, it ranked first in the Guangzhou sales list.

Investment focuses on high-energy cities, diversified storage models: The company 1H24 added 12 projects in 7 cities through the “6+1" multi-storage model, with a total construction area of 1.72 million square meters, 88% in first-tier and key second-tier provincial capitals, and 57% in the Greater Bay Area; added the Guangzhou Pazhou South TOD Phase II project, with a total construction area of 0.58 million square meters. As of 1H24, the company's total land reserves were 25.03 million square meters, distributed in 27 cities, with 94% in Tier 1 and 2 cities, and the Greater Bay Area accounting for 41%. The financial situation is stable and secure, and financing costs are continuously optimized: As of 1H24, the company's three red line indicators remained green. The balance ratio, net debt ratio, and short cash debt ratio after excluding advance payments were 68.3% and 58, respectively. %% and 1.53 times. An additional 1.5 billion yuan of domestic corporate bonds and 2.39 billion yuan of overseas RMB dim sum bonds were issued. The weighted financing cost during the period was 3.57%, a year-on-year decrease of 41 BP, and the average financing cost at the end of the period was 3.47% investment proposal

The company's sales are resilient, the land acquisition channels are unobstructed, and future performance is expected to grow. Considering the downward market pressure on gross margin, we adjusted the company's net profit due to mother in 2024/2025/2026 to 3.2/3.49/3.81 billion yuan (originally 3.57/3.93/4.31 billion yuan), with year-on-year growth rates of 0.4%, 9.3%, and 9.1%, respectively. The current price of the company's stock is 4.4/4.0/3.7 times the PE valuation, maintaining a “buy” rating.

Risk warning

Policies are not boosting the market well; the Guangzhou market continues to decline; other housing companies have defaulted.