The majority shareholders are strong: The company is a trading and real estate platform under C&D Group, the leading state-owned enterprise in Xiamen, and the C&D Group is 100% owned by the Xiamen Municipal State-owned Assets Administration Commission, so the actual controller of the company is the Xiamen Municipal State-owned Assets Administration Commission. Backed by strong major shareholders, the company is financially stable, has certain advantages in financing, has smooth and diversified financing channels, and continuous optimization of financing costs.

The supply chain operation business is operating steadily and is expected to benefit from increased industry concentration: the company has transformed into a comprehensive supply chain service provider. Risk exposure due to commodity price fluctuations has been reduced, and operations are more stable. It has developed a certain brand influence in categories such as metallurgical raw materials and agricultural and forestry products. Based on the “LIFT” supply chain service system, the company has achieved certain results in the consumer goods field in recent years. The supply chain operation business achieved revenue of 593.4 billion yuan in 2023, -14.8% year on year; 2024Q1-3 achieved revenue of 414.7 billion yuan, or -22.2% year over year. Although revenue declined year over year, gross profit in 2023 increased slightly by 3.3% year on year. Targeting overseas markets, China's supply chain industry has a large market size but low concentration. In the future, with the deepening of supply-side structural reforms, commodity procurement, distribution and supporting services will gradually be concentrated in efficient and professional large enterprises, making it easier for leading enterprises to use scale effects to form competitive advantages and gain more market share.

The real estate business maintains investment intensity and accurately supplements high-quality plots: the company's sales performance was good, achieving full-caliber sales of 229.5 billion yuan in 2023, +9.4% over the same period last year. In 2023, the real estate business achieved revenue of 166.5 billion yuan, +21.9% year over year; 2024Q1-3 achieved revenue of 81.4 billion yuan, +26.0% year over year. The company bucked the trend and accurately replenished core urban plots, and high-energy urban land storage has a competitive advantage, which can provide solid support for the company's carry-over revenue. On the product side, the company lays out high-quality housing in advance to meet future demand trends. Furthermore, the company has experience in old renovation and is expected to benefit from the promotion and implementation of urban village renovation.

Investment advice: The company's two main businesses are operating steadily, while actively broadening the industrial chain layout. We expect the company to achieve operating income of 669.5/629.3/605.2 billion yuan and net profit to mother of 3.5/4/4.7 billion yuan in 2024-2026. The corresponding PE was 8.11/7.00/6.07 times, respectively. It was covered for the first time, and a “gain” rating was given.

Risk warning: risk of commodity price fluctuations, real estate sales falling short of expectations, tightening real estate policies beyond expectations, etc.