Description of the event

The company announced that 2024H revenue was 21.13 billion (-42.7%), net profit loss 3.36 billion yuan (profit for the same period last year), net profit loss after deducting 2.69 billion yuan (profit of 1.39 billion yuan for the same period last year), and a comprehensive gross profit margin of 11.0% (-5.4pct).

Incident comments

Revenue and profitability both declined, and loss of investment income and asset impairment dragged down performance. 2024H's revenue was 21.13 billion yuan (-42.7%), mainly due to reduced settlement resources, and development business settlement volume fell 54.7% year over year to 14.1 billion yuan. Significant losses due to parent performance were related to the decline in gross margin, conversion of investment income to loss, and asset impairment: 2024H Company's comprehensive gross profit margin was 11.0% (-5.4pct), of which the gross margin for development business settlement fell 5.6 pct to 9.2% year on year; net investment income was a loss of 0.75 billion yuan (profit of 0.71 billion yuan for the same period last year); total asset and credit depreciation of 2.88 billion yuan (only 0.05 billion yuan depreciated in the same period last year). Furthermore, after a sharp decline in revenue, the passive increase in the cost ratio to 14.5% (+5.4pct) during the period also dragged down performance to a certain extent. As of 2024H, advance receipts of 66.76 billion yuan (-31.4%) on the company's account, advance payment/annualized settlement revenue = 0.98X. Later settlement revenue is expected to be under pressure, and efforts are still needed to return to mother.

Sales are still at the top of the industry, and prudent investment and active disposal of assets in the downturn cycle are rational choices. 2024H has sales volume of 36.11 billion billion (-57.9%), ranking 14th in the industry, and is still in the top tier of scale; the sales area is 2.403 million square meters (-49.0%), and the average sales price is 0.015 million yuan/square meter (-17.5%). The decline in average price may be related to the decline in inventory structure and discount promotions. In the first half of 2024, the company did not obtain new projects. It actively disposed of assets and shares in Xi'an, Shaoxing and other places to obtain liquidity. Prudent investment and disposal of assets during the industry's downturn was a rational choice. As of 2024H, the company has not settled 35.89 million square meters of soil storage (-26.4%), and the equity ratio is 44.6%. Land storage is still on a certain scale, but the share of marketable new inventory has declined. In the medium term, the company lowered the volume of new construction and completion plans for the full year of 2024 to 0.95 and 10.71 million square meters (-69.6%, -20.3% year-on-year). Compared with the planned volume at the beginning of the year, the 2024H company's new construction decreased 67.0% year over year to 0.59 million square meters (accounting for 62% of the annual plan), and completion increased 7.3% year over year to 4.69 million square meters (44% of the annual plan). Land acquisition has not improved, and the willingness to start new construction is not strong against the backdrop of a tight capital chain.

The size of interest-bearing debt continued to decline, and the last dollar debt was successfully repaid in August. As of 2024H, the company's interest-bearing debt was 81.72 billion yuan (-25.4%), of which the share of bank loans increased by 18.1 pct to 88.9%, and financing costs decreased by 0.01 pct to 4.38% year on year. The company's interest-bearing debt has declined steadily, focusing on sales repayment, actively disposing of asset monetization, and successfully repaid the last dollar debt in August (principal amount of 0.48 billion US dollars). The remaining amount of maturing debt in the open market is relatively small and evenly distributed. The pressure on concentrated debt maturing has eased markedly, but the capital chain is still tight in an environment where sales are weak.

Investment advice: Constrained by declining market demand and contraction in industry credit, the company's operating orientation also tends to be cautious; as debt pressure approaches and the capital chain is getting tighter, the company's attitude of focusing on sales repayments and actively mortgaging and disposing of high-quality assets in exchange for cash flow is worthy of recognition. As an established high-quality housing enterprise, the company still has relatively outstanding operating efficiency and resource endowments. If policies are further relaxed and market demand stabilizes, the company is expected to usher in marginal improvements at the management level with efficient operation and excellent brands. The net profit due to 2024-2026 is expected to be -5.07/0.45/0.75 billion yuan, and the 2025-2026 performance corresponding to the current stock price is 36/21X, respectively, maintaining a “gain” rating.

Risk warning

1. Sales declined, cash payments declined, and pressure on the capital chain was further tightened; 2. Asset disposal was blocked, and pressure on the capital chain increased.