Leasing and sales revenue declined, investment income dragged down profits. Maintaining a “buy” rating, Zhangjiang Hi-Tech released its 2024 three-quarter report. The company's revenue declined and profits were under pressure. Both leasing business and sales revenue declined year on year, and industrial investment continued to increase. We maintain our profit forecast. We expect the company's net profit to be 1.125, 1.334, and 1.461 billion yuan for 2024-2026, corresponding EPS of 0.73, 0.86, and 0.94 yuan. The PE corresponding to the current stock price is 37.1, 31.3, and 28.5 times, maintaining a “buy” rating.

Revenue declined, profits were under pressure, and net return on investment was drastically reduced

The company achieved revenue of 1.683 billion yuan in the first three quarters, down 3.7% year on year; realized net profit of 0.511 billion yuan, down 33.1% year on year; of these, revenue for the third quarter and net profit to mother decreased by 62.1% and 34.1% respectively; achieved net operating cash flow of -2.282 billion yuan, basic earnings per share of 0.33 yuan, and net sales interest rate decreased by 14.2 pct to 29.9% year on year. The decline in the company's net profit to mother was due to (1) a year-on-year decrease in gross sales margin of 7.4 pct to 58.6%; (2) a 5.5 pct year-on-year increase in the rate rate during the period; (3) investment income of 0.412 billion yuan was generated in the same period in 2023, leading to a 77% year-on-year decrease in net investment income in the first three quarters; the decline in the company's operating cash flow was mainly due to a sharp year-on-year increase in the park's comprehensive development expenses.

Rental revenue declined year-on-year, and project construction progressed rapidly

The company achieved real estate rental income of 0.76 billion yuan in the first three quarters, a year-on-year decrease of 1.3%, of which rental income increased 2.2% year-on-year in the third quarter. As of the end of September, the total area of rental real estate was 1.507 million square meters, which was basically the same from month to month.

The company achieved sales revenue of 0.905 billion yuan in the first three quarters, a year-on-year decrease of 5.3%, leading to a decline in revenue scale in the first half of the year. Among them, sales revenue for the third quarter was 0.179 billion yuan, which is a big difference from 0.933 billion yuan in the same period in 2023. The company had a stock of 14 projects under construction in the first half of the year, involving a total construction area of about 2.42 million square meters. Among them, the Kangqiao Huikang Tiandi plot was started, which will focus on the two major segments of integrated circuit materials and equipment to build a materials and equipment industrial park.

The scale of investment has been steadily expanding, and financing channels are unobstructed

By the end of the first half of the year, the company's cumulative industrial investment had reached 9.441 billion yuan, an increase of 8.36% over the previous year, of which the direct investment project amount was 40.77 yuan, and the participating funds had pledged investment of 5.464 billion yuan. The company raised 4.6 billion yuan in the open market in January-September, including corporate bonds and 1.8 billion yuan each, with a coupon interest rate of no more than 2.57%. It plans to issue medium-term notes of no more than 1.65 billion yuan in October, and the financing channels are unobstructed.

Risk warning: Real estate industry sales downside risks, business risks due to policy adjustments, and industrial investment risks.