Description of the event

The company announced that revenue for the first three quarters of 2024 was 20.48 billion (-1.1%), net profit due to mother was a loss of 0.59 billion yuan (loss of 0.5 billion in the same period last year); net profit loss after deduction of 1.62 billion yuan (loss of 0.57 billion for the same period last year), and a comprehensive gross profit margin of 24.4% (-2.9 pct).

Incident comments

Revenue and profitability both declined, and losses from joint ventures and increased profits and losses from minority shareholders dragged down the parent's performance. The company's revenue for the first three quarters of 2024 was 20.48 billion (-1.1%), net profit due to a loss of 0.59 billion yuan (loss of 0.5 billion in the same period last year), and a slight decline in revenue due to a slight decline in revenue due to a year-on-year decline of 2.9 pct to 24.4%, joint venture investment income loss of 0.7 billion yuan (profit of 0.09 billion in the same period last year), and minority shareholders' profit and loss increased 106.1% year on year to 0.88 billion (net profit only) 0.3 billion). Although taxes and surcharges fell 1.0 pct to 2.3% year on year, it was still difficult to offset the loss due to parent performance.

Net profit loss of 1.62 billion yuan after deduction in the first three quarters was significantly higher than the net profit loss of 0.59 billion yuan due mainly to the successful launch of the Huaxia Joy City Commercial REIT in the third quarter, which achieved an investment income of about 2.1 billion yuan. As of 2024Q3, advance receipts of 32.57 billion (-12.7%) on the company's accounts, advance payments/annualized settlement revenue = 1.05X. Advance payments guarantee post-settlement revenue. The outlook for revenue is steady, but there is still pressure on gross margin and impairment in the downward cycle, and efforts are still needed for later results.

The sales scale industry ranks 25th, and soil storage is relatively abundant to guarantee later sales. In the first three quarters of 2024, the company had sales of 26.2 billion yuan (-32.4%), sales area 1.01 million square meters (-37.3%), average sales price 26,008 yuan/square meter (+7.7%), ranking 25th in the sales scale industry (data from Kris). From a land acquisition perspective, in the first three quarters of 2024, the company obtained a total of 4 projects in Hangzhou and Xi'an (3 in the same period last year), with a full-caliber land acquisition amount of 7.7 billion yuan (+145.1%), a land acquisition area of 0.497 million square meters (+195.7%), a floor price of 15,504 yuan/square meter (-17.1%), and land acquisition intensity (in terms of amount and area) was 29.4% and 49.3%, respectively. The company's land acquisition efforts were reasonable in the context of a sharp contraction in industry investment. As of 2024H, the sellable land storage value of the company is about 133.2 billion yuan. The saleable period is over 3 years. Once the policy is strengthened, the market margins improve margins, and relatively sufficient land storage guarantees later sales.

Interest-bearing liabilities have declined, and short-term cash loans have a higher guarantee ratio. As of 2024Q3, the company's interest-bearing debt was 68.54 billion yuan (-11.9%), and the amount of interest-bearing debt declined. Short-term cash debt ratio (without excluding restricted funds) = 1.85X (-0.1X), short-term debt repayment capacity is fair, net debt ratio 93.6% (-10.8pct), and balance ratio excluding advance receipts of 76.4% (+4.3pct).

Investment advice: Performance is under pressure, and later operations still require effort. The company responded to the call, actively revitalized assets, successfully issued the Huaxia Joy City Commercial REIT in the third quarter, optimized the asset structure, and unleashed the value of mature investment property assets. However, against the backdrop of continued sluggish sales in the industry, further efforts are needed to improve the company's operations and performance. The company's net profit from 2024-2026 is predicted to be -0.82/0.13/0.24 billion, and the PE corresponding to the current stock price in 2025-2026 is 104/59X, giving it an “gain” rating.

Risk warning

1. Sales continued to be weak, and the company's sales and cash flow repayments fell short of expectations; 2. Gross margin declined, and inventory depreciation dragged down performance.