Key investment points:

It is proposed to distribute an interim cash dividend of 0.4 yuan per share, accounting for 71% of the 3Q24 performance after excluding perpetual bonds. Actively implement the 24-25 high dividend strategy of 0.7 yuan per share, and the corresponding dividend rate is as high as 7%. On January 2, the company announced the 2024 mid-term profit distribution plan. The company plans to distribute a cash dividend of 0.4 yuan per share to all shareholders, accounting for 57.28% of net profit attributable to mother in the first three quarters of 2024, accounting for 71.25% of net profit due to mother for the first three quarters of 2024 after excluding perpetual bonds. In addition, the company previously issued an announcement to pass the “Bill on Enhancing Shareholder Return Plans After the Transaction Is Completed”, which plans to formulate profit distribution plans for 2024 and 2025: the annual cash distribution profit is not less than 30% of the profit that can be distributed to the mother for the current year, and the annual dividend per share is not less than 0.7 yuan. The dividend rate can reach 6.97% based on current stock prices. The company's distribution of mid-term cash dividends this time shows that it is actively implementing a high-dividend strategy. The scale of dividends is impressive, full of sincerity, and effective protection of shareholders' interests.

The company plans to acquire 10% of C&D Real Estate's shares for 3.1 billion and was approved by the shareholders' meeting to increase the concentration of C&D International's high-quality assets and enhance the company's profitability. It is expected that it will continue to acquire the remaining shares in the future. On December 17, the company announced that the board of directors passed a bill to acquire 10% of C&D Real Estate's shares held by the controlling shareholder C&D Group. The purchase price corresponds to a valuation of 3.066 billion yuan; after this transaction, the company will increase its holding of C&D Real Estate shares from 54.654% to 64.654%. Currently, the book value of C&D Real Estate shareholders' equity after deducting perpetual debt is 28.5 billion yuan. The current assessed price is 30.7 billion yuan, and the value-added rate is 7.48%, which corresponds to 1.07 times the assessed PB; compared with the C&D Real Estate Assessment PB of 1.27 times that announced in December '23, this valuation is full of sincerity, which is conducive to enhancing the company's profitability after the acquisition is completed. On December 27, the company announced that the bill for C&D Co., Ltd. to acquire 10% of C&D Real Estate's shares was passed by the shareholders' meeting. In this vote, C&D Group, the majority shareholder, avoided voting, and small and medium shareholders voted up to 99.55% of the votes in agreement. In addition, the company announced that C&D Group made an interindustry competition promise in 2009 and will transfer 45.346% of its shares in C&D Real Estate to C&D shares at the right time. After acquiring 10% of C&D Housing's shares, C&D Group still holds 35.346% of the shares. We expect that in the future, C&D Co., Ltd. will continue to acquire the remaining shares of C&D Group to fulfill the 2009 peer competition promise.

Real estate sales rankings continue to rise, land storage focuses on the first and second tier, with less stranded inventory, excellent inventory structure, and relatively adequate impairment accrual. In terms of real estate business, according to Kerry, in 2024, C&D real estate sales amount was 133.5 billion yuan, -29% year over year; sales ranked 7th in the country, up 1 place from the previous year. By the end of 24H1, the company's land storage scale was 20.86 million square meters, corresponding to a goods value of 333.1 billion yuan, -7% and -6%, respectively. The company's Tier 1 and 2 equity land reserves accounted for about 77% of the value, an increase of 3.3 pct over the end of '23. In 2023, developed products accounted for only 9% of C&D's inventory, and Sun's C&D International Group's inventory accounted for only 5%, far lower than the average value of key housing enterprises of 18%, indicating that the company has less stranded inventory and excellent inventory structure; the company's inventory impairment preparations accounted for 2%, which is the same as the average value of 2% of key housing enterprises, indicating that impairment calculation is relatively sufficient. In terms of supply chain business, continuous deepening of professional development has contributed relatively steadily to the company's performance and cash flow.

Investment analysis opinion: Mid-term dividends actively implement the high dividend strategy. The acquisition of C&D Real Estate was approved by the shareholders' meeting, maintaining the “buy” rating. As a state-owned enterprise in Xiamen, C&D Co., Ltd. is active in the two major businesses of supply chain operations and real estate; the company recently plans to acquire high-quality shares in C&D Real Estate, which is expected to be boosted in terms of both performance and valuation; it also plans to have a dividend of not less than 0.7 yuan per share in 24 and 25. The dividend scale is impressive and full of sincerity. The current price corresponds to a dividend rate of 7.0% this year and next two years, which is a high dividend quality target. We maintain the 24-26 net profit forecast of 3.22, 4.03, and 4.2 billion yuan, corresponding to a 24/25PE of only 9.2X/7.3X. Currently, the company's valuation is still attractive and maintains a “buy” rating.

Risk warning: Sales in the real estate industry fell beyond expectations. The company received a warning letter from the Xiamen Securities Regulatory Bureau, and the company's relevant personnel received regulatory discussions and decisions on measures.