Incident: On November 30, Kerry data showed that China's overseas development achieved full-caliber sales of 270.4 billion yuan and equity sales of 243.4 billion yuan in January-November.

Comment: Sales were quickly repaired, and it was at the top of the industry. At the end of the year, efforts to obtain core land storage in first-tier cities were increased.

Sales quickly recovered and remained at the top of the industry: According to Kerui data, from January to November 2024, the company achieved sales volume of 270.4 billion yuan (full caliber, same below), down 5.8% year on year. The cumulative year-on-year decline was 3.2 pct narrower than in January-October, ranking second in Kerry's “China Real Estate Enterprise Full Caliber Sales Top 100” list. The company's sales performance clearly outperformed the market; the company's average sales price was 26,471 yuan/square meter, up 14.1% year on year. Mainly due to the impact of high-end improvements in real estate sales growth in core cities; among them, in October and November, the company achieved sales of 41.6 billion yuan and 30 billion yuan, respectively, up 66.0% and 30.7% year on year, respectively. Since October, sales have continued to grow rapidly year on year, and the recovery trend is obvious.

Focus on core cities and increase the acquisition of core land storage in first-tier cities at the end of the year: From January to October 2024, the company's total land acquisition price was 23.5 billion yuan (excluding Zhonghai Hongyang, same below), a year-on-year decrease of 78.5%, and the overall land sales ratio was 11.2%, a year-on-year decrease of 37 pcts. Among them, the total price of land acquired by the company in first-tier cities was 13.6 billion yuan, accounting for 57.8% of the total land acquisition price in core second-tier cities such as Xi'an and Chengdu.

In November 2024, the company acquired a new residential plot in Yangpu District, Shanghai (total transaction price: 3.65 billion yuan, total floor price: 73,288 yuan/square meter, premium rate 16.33%), and in Chaoyang District, Beijing (total transaction price 15.33 billion yuan, transaction floor price 38,913 yuan/square meter, premium rate 0.21%); on December 2, the company and China Resources Land formed a consortium to acquire a new parcel of residential land in Nanshan District, Shenzhen (total transaction price 18.51 billion) Lion yuan , the transaction floor price is 70,388 yuan/square meter, premium rate 46.32%). In recent years, the company has continued to focus on obtaining core plots in core cities. First-tier cities have abundant high-quality land storage, laying a solid foundation to guarantee the speed of sales elimination, while continuously improving the competitiveness of high-end residential development.

Revenue declined slightly, and marginal pressure on profit margins remained: in the first three quarters of 2024, the company achieved cumulative revenue of 109.58 billion yuan, a year-on-year decrease of 6.7%. Among them, in the third quarter of 2024, the company achieved revenue of 22.65 billion yuan, a year-on-year decrease of 19.8%. Revenue declined or resources to be settled were reduced due to a slowdown in settlement progress in the third quarter and a decline in sales in the previous period (the company's pre-sale property fell 17.4% yoy to 110.9 billion yuan at the end of mid-'24); the company's operating profit in the first three quarters 18.18 billion yuan, down 19.6% year on year, operating profit margin decreased by 2.7 pct year on year. Among them, operating profit for the third quarter was 2.13 billion yuan, down 39.7% year on year, operating profit margin was 9.4%, down 3.1 pct year on year. The company's operating profit declined significantly in the first three quarters, or due to the decrease in the scale of project settlement and continued pressure on gross margin. Among them, the downward pressure on operating profit margin in the third quarter was still quite obvious.

Profit forecast, valuation and rating: Considering that the company's total land acquisition in 2024 may be reduced, and operating profit margins are under pressure, we lowered the company's 24-26 basic EPS forecast to 2.24 yuan/2.34 yuan/2.50 yuan (the original forecast was 2.36 yuan/2.43 yuan/2.54 yuan). The current price corresponds to the 24-26 PE (basic) valuation to 5.6 /5.3/5.0 times, respectively. We are optimistic that the company will increase its sales market share and competitiveness in high-end residential development and maintain the “buy” rating.

Risk warning: Risks such as sales and land acquisition falling short of expectations, project completion falling short of expectations, and industry downturn exceeding expectations.