Investment logic:

It has a well-located, high-quality, and unreplicable core asset in Beijing's CBD. The company's core asset is the ITC complex. The core highlights are: ① It is located in the core area of the capital Beijing. The location is scarce and unique. ② Close to Guomao subway station, convenient transportation and high traffic. ③ It is equipped with international business service facilities such as office buildings, shopping malls, hotels, apartments, etc., and has a high-end positioning, bringing together many internationally renowned multinational companies, trading companies and international retail stores.

All business formats are in a steady state of operation. In recent years, in the face of macroeconomic and external environmental fluctuations, the company's overall rental income and revenue have continued to rise steadily, and rent levels and occupancy rates have remained high. By business type, office buildings: The building has many of the world's top 500 tenants. The tenants are of high quality and strong ability to pay. The average rent for 2023/24H1 is 638/648 yuan per square meter per month, and the occupancy rate is 96%/93%. Mall: Large scale, variety, grade, and scarce luxury resources. The average rent for 2023/24H1 is 1279/1,341 yuan per square meter per month, and the occupancy rate is 98%/97%. Apartments: The average rent declined slightly and the occupancy rate continued to rise. In 2023/24H1, the average rent was 370/368 yuan per square meter per month, and the occupancy rate was 86%/89%.

Hotels: Gradual restoration since '23, gross operating margin has improved, and performance is no longer being hampered.

The dividends are stable and guaranteed, and have real dividend attributes. The essence of the company's business model is rent collection. On the one hand, it has excellent attributes such as ① high profit margins and good profit delivery; ② low debt ratio and sufficient capital; ③ steady growth in cash flow; ④ stable operation, and currently no expansion or sale of assets. On the other hand, the intention to pay dividends is guaranteed. The company actively gives back to shareholders. Since its listing, it has paid dividends for 26 consecutive fiscal years. Since listing, the average dividend rate has been 52%, and the dividend ratio has gradually increased in recent years. The dividend payment rate after adding special dividends in 2023 reached 104%. In summary, the company's dividend attributes are guaranteed.

Benefiting from the general environment of interest rate cuts, the company's valuation may increase. As a dividend target with stable operating performance, continuous dividends every year, and a high distribution ratio, the company's valuation may be repaired after this year. After the denominator discount rate falls, the company's valuation may be repaired.

Profit forecasts, valuations, and ratings

The company holds core assets, has stable operating performance, and steady growth in performance. We expect the company's net profit to be 1.31 billion yuan/1.37 billion/ 1.42 billion yuan in 2024-26, respectively, +4.0%/+4.0% year-on-year. Considering that the company's assets are highly scarce and unreplicable; the asset quality is excellent, the operation is stable, and the performance is expected to continue to grow steadily in the future, we gave the company a PE valuation of 25.0x in 2024, with a corresponding target price of 32.5 yuan/share. Compared with the current closing price of 23.48 yuan/share (October 25), there is room for increase of about 38%. First coverage, giving a “buy” rating.

Risk warning

Macroeconomic pressure; rental rates and rent levels fall short of expectations; dividends fall short of expectations.