Key points of investment:

Event: C&D shares release 2024 semi-annual report

Business losses for MediaTek Group and Macalline dragged down performance. In the first half of 2024, the company's revenue was 319.015 billion yuan, -16.80% YoY; net profit to mother was 1.199 billion yuan, or -37.67% YoY, mainly affected by business losses of MediaTek Group and Macalline. As of the end of June 2024, the company's total assets were 902.309 billion yuan and net assets were 229.177 billion yuan; net cash flow from operating activities was -22.112 billion yuan, or -194.56% compared with the same period, mainly due to a decrease in sales repayments in the real estate business and an increase in land price payments during the period.

Supply chain operation business: Deeply cultivate expertise to build the foundation and lay out the global market. In the first half of 2024, the company's supply chain operation business achieved operating income of 263.569 billion yuan, -24.81% year on year; net profit to mother was 1.421 billion yuan, -15.07% year over year, mainly due to the impact of macroeconomic conditions, commodity price fluctuations and weakness in the traditional automobile industry, which declined profits from some of the company's commodity collection and distribution business and automobile sales business compared to the same period last year. The company continues to pursue a “specialized” development strategy. The volume of major commodities operated in the first half of 2024 was nearly 105 million tons, a year-on-year growth rate of nearly 9%, and many core categories continued to maintain a leading position in the industry. Among them, the operating volume of steel exceeded 33 million tons, an increase of more than 13% over the previous year; the operating volume of agricultural products exceeded 20 million tons, an increase of more than 28% over the previous year.

Real estate business: efficient repayment, stable financial stability, steady expansion of storage and maintenance strategies. In the first half of 2024, the company's real estate business division achieved operating income of 51.221 billion yuan, +55.63% year over year; net profit to mother was 0.155 billion yuan, or -38.02% year-on-year, mainly affected by the subsidiary C&D Real Estate and MediaTek Group's inventory price reduction preparations of 0.463 billion yuan and 614 million yuan respectively. In the first half of 2024, the company's real estate business division achieved a total full-caliber contract sales amount of 74.268 billion yuan, and full-caliber sales repayment of about 71.704 billion yuan; the repayment ratio was about 97%, and the repayment ratio remained high for many years. Among them, the company's full-caliber sales in first-tier and second-tier cities accounted for nearly 80%, and the number of cities with full-caliber sales exceeding 2 billion yuan reached 9. In terms of investment, the company 1H24 obtained 17 cases of high-quality land through diversified methods. The total amount of full-caliber land acquisition was about 38.762 billion yuan, of which first-tier and second-tier cities accounted for 98% of the land acquisition amount.

Home Furnishing Mall Operation Business: In the first half of 2024, the Company's Home Furnishing Mall Operation Business Division achieved operating income of 4.225 billion yuan, net profit to mother of -0.377 billion yuan, gross margin of 59.69%; customer satisfaction in shopping malls reached 96.61%, which is superior to the industry level.

Investment advice: Maintain an “better than the market” rating. We forecast the company's EPS of 1.25 yuan in 2024, giving the company 7-8 times PE valuation in 2024. The corresponding market value range is 25.9-29.5 billion yuan, and the corresponding reasonable value range is 8.77-10.03 yuan per share.

Risk warning: Market recovery falls short of expectations.