Event: On October 30, 2024, the company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved revenue of 78 billion yuan, +2.88% year-on-year; realized net profit of 2.6 billion yuan to mother, or -31.00% year-on-year.

Revenue increased slightly year on year, and profit margins continued to be under pressure: from January to September 2024, the company achieved revenue of 78 billion yuan, a slight increase of 2.88% year on year; however, due to the fact that the gross margin carried over from the company's development business projects still declined year on year, the company's net profit to mother fell 31.0% year on year. In addition, the company's non-recurring profit and loss for the first three quarters was 0.92 billion yuan, higher than the full year of 2023, mainly including gains and losses on the disposal of illiquid assets.

The sales scale has declined, but there are plenty of settlement resources: from January to September 2024, the company achieved a cumulative contract sales amount of 145.2 billion yuan, a year-on-year ratio of -35.9%; a cumulative sales area of 6.42 million square meters, -30.0% year-on-year; and a cumulative average sales price of 2,2597 yuan/square meter, or -8.4% year-on-year. As of the end of the third quarter of 2024, the company's contract debt was 191.3 billion yuan, an increase of 11.5 billion yuan over the end of the 2024 half-year period. The overall settlement resources were abundant.

Prudent land acquisition and deep cultivation in core cities: From January to September 2024, the total amount of land acquired by the company was 28.9 billion yuan, with a land acquisition intensity of 19.9%. Although it is an increase from half a year (14.5%), it is still lower than the level of 2023 (38.6%). Although land acquisition efforts are low, the company has obtained land in an excellent location and is deeply involved in core Tier 1 and 2 cities such as Shanghai, Hangzhou, Guangzhou, and Xi'an.

Guaranteed housing REITs were listed, and financing channels were broadened: On October 23, 2024, the China Merchants Fund Shekou Rental Housing REITs was listed on the Shenzhen Stock Exchange. The company's financing channels were broadened, and at the same time, it helped the company revitalize its existing assets and further optimize operations.

Investment advice: The company continues to cultivate core cities, has abundant settlement resources, and diversified financing channels. We expect the company to achieve operating income of 186.3/193/196.3 billion yuan and net profit to mother of 6.2/6.8/7.1 billion in 2024-2026. The corresponding PE was 16.80/15.51/14.86 times, respectively, maintaining the “gain” rating.

Risk warning: Sales recovery fell short of expectations, real estate regulation tightened beyond expectations, land acquisition fell short of expectations, etc.