Event: Company Announces 2024 Q3 Report

The decline in carry-over scale and gross margin affected operating performance. From January to September 2024, the company achieved revenue of 41.003 billion yuan, -21.59%; net profit attributable to shareholders of listed companies - -3.41 billion yuan, or -5978.05% year on year; gross margin was 12.57%, down 4.38 percentage points from the same period in 2023. As of the end of the third quarter of 2024, the company's total assets were 330.81 billion yuan, down 11.51% from the end of 23. Net assets attributable to shareholders of listed companies were 61.475 billion yuan, down 5.51% from the end of '23; the balance ratio was 67.61%, down 1.12 percentage points from the end of '23.

Asset impairment continues to be accrued. In the third quarter of 2024, the company accrued asset impairment reserves of 514.13 million yuan, of which: total credit loss provision was 242.71 million yuan, and inventory price reduction preparations totaled 271.42 million yuan. Previously, in the first half of 2024, the company accrued asset impairment reserves of 2925.25 million yuan, of which: the total amount of accrued credit loss reserves was 834.43 million yuan, totaling 2090.82 million yuan.

The bottom of the industry policy is in place, and sales are yet to be improved. From January to September 2024, the company achieved a total contract area of 3.593 million square meters, a year-on-year decrease of 46.29%; the cumulative contract amount was 52.81 billion yuan, a year-on-year decrease of 56.69%. In the first three quarters of 2024, the company completed a total construction area of about 0.709 million square meters, a total completed area of about 6.436 million square meters, a total contract area of about 3.593 million square meters, and a total contract amount of about 52.81 billion yuan. In September 2024, the Politburo meeting of the Central Committee clearly proposed “to stop the decline and stabilize the real estate market”. We believe that the current policy support for the real estate industry has been significantly strengthened, which is conducive to the improvement of the company's subsequent sales situation.

Investment advice: Maintain an “better than the market” rating. As industry prices and sales declined faster than expected in 2023, the company's accrued impairment and short-term settlement profit margins declined significantly. We believe that the company's current net profit does not reflect future potential profit changes. Considering policy efforts, asset prices are gradually finding a bottom. There is room for asset price restoration in the future. Using the PB method of valuation is more in line with current market changes. We forecast the company's EPS in 2024 to be -0.32 yuan, net assets per share of 14.07 yuan, and be given 0.5-0.6 times PB, corresponding to a reasonable value range of 7.03 to 8.44 yuan per share.

Risk warning: 1) Sales and settlement fall short of expectations; 2) The industry faces downside risks.