Core views

In the first half of 2024, the company achieved revenue of 35.3 billion yuan, up 10.1 percent year on year, realized net profit of 1.83 billion yuan, a year-on-year decrease of 15.9%, and achieved core net profit of 17.0.4 billion yuan, a year-on-year decrease of 18.8%. The company's increase in revenue and profit was mainly due to a gross profit margin of 13.7% in the first half of the year, down 4.1 percentage points from the same period last year. The company maintained stable dividends, with an interim dividend of HK$0.189 per share and a dividend payout ratio of 40%. In the first half of the year, the company achieved sales volume of 55.4 billion yuan, a year-on-year decrease of 33.8%. It ranked ninth among the top 100 real estate companies, and entered the top ten sales rankings for the first time. The company acquired 12 plots of land in the first half of the year. As of the end of June, the company's land reserves were 25.03 million square meters. 94% were located in Tier 1 and 2 cities, which are rich and of high quality.

occurrences

The company announced its 2024 interim results, achieving revenue of 35.3 billion yuan, a year-on-year increase of 10.1%, achieving net profit to mother of 1.83 billion yuan, a year-on-year decrease of 15.9%, and a core net profit of 17.0.4 billion yuan, a year-on-year decrease of 18.8%.

Brief review

The company's performance declined due to the downturn in the industry. In the first half of 2024, the company achieved revenue of 35.3 billion yuan, up 10.1% year on year, realized net profit of 1.83 billion yuan to mother, a year-on-year decrease of 15.9%, and achieved core net profit of 1.74 billion yuan, a year-on-year decrease of 18.8%. The company's increase in revenue and profit was mainly due to a gross profit margin of 13.7% in the first half of the year, down 4.1 percentage points from the same period last year. The company maintained stable dividends, with an interim dividend of HK$0.188 per share, with a dividend payout ratio of 40%.

It entered the top ten sales rankings for the first time. In the first half of 2024, the company achieved sales volume of 55.4 billion yuan, a year-on-year decrease of 33.8%. During the same period, the sales volume of the top 100 real estate companies fell 41.8% year on year, and the company's sales performance was superior to the general trend. In the first half of the year, the company ranked 9th among the top 100 real estate companies in terms of sales, up three places from 2023, and the company entered the top ten for the first time. The company said it will keep its annual sales target of 147 billion yuan unchanged, increase new sales efforts in the second half of the year, and the sales target is expected to be achieved.

Diversified methods to increase reserves, and land reserves are abundant. In the first half of 2024, the company obtained 12 plots of land through the “6+1" land acquisition model, with a total construction area of 1.72 million square meters, a year-on-year decrease of 20.7%. Of these, 66% were obtained through diversified methods, which helped increase the company's profit margin. As of the end of June 2024, the company's total land storage area was 25.03 million square meters, distributed in 27 cities across the country. Of these, 94% were located in Tier 1 and 2 cities and 60% in the Greater Bay Area and East China region. The land reserves are rich and of high quality.

The profit forecast and target price were lowered, and the buying rating was maintained. We forecast the company's core EPS for 2024-2026 to be 0.84/0.89/0.99 yuan (the original forecast was 0.90/0.95/1.02 yuan). Referring to comparable company valuations, the target price was lowered to HK$5.96 (RMB to HKD exchange rate 1:1.10) to maintain the purchase rating.

Risk warning: 1) In terms of performance, the current market is still in a downward period, and there is always pressure to depreciate inventory, which is likely to continue to be reflected in performance. 2) In terms of operation, the company has always maintained a high level of land acquisition intensity. Currently, the market has not seen a clear inflection point, which may cause the expected price at the time of land acquisition not to be achieved, thereby further affecting subsequent performance and putting pressure on cash flow. 3) The nationwide expansion of the company's TOD model may be blocked by high competitive barriers in local markets, and the current slowdown in subway construction in some cities may have a certain impact on the company's project expansion. 4) The company's soil storage accounts for a relatively high share in a single city in Guangzhou, which is not conducive to risk diversification.