24Q1-Q3 revenue was +3% year over year and performance was -31% year over year, lower than expected, due to a decline in settlement profit margins. According to the announcement, with 24Q1-Q3, the company's operating income was 78.01 billion yuan, +2.9% year on year; net profit to mother was 2.6 billion yuan, which was -31.0% year over year, lower than market expectations; net profit after deduction of 1.68 billion yuan, or -43.3% year on year; basic earnings per share of 0.22 yuan, -43.6% year on year; weighted return on net assets of 2.04%, -1.55pct year on year. 24Q1-Q3's gross profit margin and net profit margin were 10.0% and 3.3%, respectively, -8.3 pct and -1.6 pct, respectively; the three-fee rate was 6.4%, the same as the previous year, with sales, management and finance rates of -0.1 pct, -0.3 pct, and +0.4 pct, respectively. The decline in the company's performance is mainly due to the continued decline in gross margin carried over from development business projects. By the end of 24Q3, the company's contract debt reached 191.3 billion yuan, +18% compared to the end of 2023, which can cover 1.1 times revenue for 23 years.

24Q1-Q3 sales volume was -36%, ranking fifth in the industry, with a land acquisition to sales ratio of 20%, continuing to focus on core cities.

According to the announcement, from January to September 2024, the company achieved sales amount of 145.17 billion yuan, -36%; sales area 6.424 million square meters, -30% compared with sales ranking fifth in the industry; from January to September 2024, the company added 1.4 million square meters, land acquisition amount 28.88 billion yuan, 20% land acquisition/sales ratio, 22% of land acquisition/sales area ratio; average floor price 0.0206 million/square meter, accounting for 91 average sales price %; The company's land acquisition mainly focuses on core Tier 1 and 2 cities such as Shanghai, Chengdu, Hangzhou, Hefei, Nanjing, Guangzhou, Zhengzhou, Sanya, and Xi'an. By the end of 2024H1, the company's total unfinished area was 33.64 million square meters, covering 2.8 times sales in 23, and rich in soil storage.

The three red lines are steady in the green tier. The financing advantage is obvious, and the repurchase shows confidence in continuous development. According to the announcement, by the end of 2024Q3, the company's balance ratio and net debt ratio after excluding advance payments were 60% and 65%, respectively, and the short cash debt ratio was 2.1. The three red line indicators were in the green range. 2024H1, the company's weighted financing cost is only 3.25%, compared to -0.22pct at the beginning of the year. The financing cost continues to be optimized. At the end of 2024H1, bank financing accounted for 64.6%, and interest-bearing debt maturing within one year accounted for only 16.7%, down 3.34pct from the end of 2023. Furthermore, the company recently announced the repurchase of the company's shares through centralized bidding transactions, fully demonstrating confidence in the company's future sustainable development and recognition of long-term value.

Investment analysis opinion: Performance is under pressure in the short term. Repurchase shows confidence and maintains a “buy” rating. China Merchants Shekou has Tier 1 and 2 high-quality soil storage. In particular, the resource reserves in the Greater Bay Area are extremely high. At a time when the industry is currently declining, it is expected that the company will benefit from the optimization of the industry pattern by leveraging financing advantages and strategies to focus on core cities. Considering the downturn in the industry, we lowered the company's 2024-26 net profit forecast to 5.7, 6.2, and 6.8 billion yuan (originally 6.6, 7.3, 8.1 billion yuan). The current price corresponds to 18 times the 24-year PE, maintaining the “buy” rating.

Risk warning: Real estate policies have been tightened beyond expectations, sales have declined beyond expectations, and the real estate tax pilot has expanded beyond expectations.