On March 27, 2024, the company announced its 2023 results: achieved revenue of 42,612 billion yuan, +3.0% year on year; net profit to mother of 292 million yuan, -85.0% year on year; and core net profit to mother of 3,940 million yuan, -21.6% year on year.
Revenue fell slightly short of expectations and fell short of expectations, mainly due to sharp depreciation. The company's revenue growth in 2023 fell slightly short of expectations, mainly due to: ① the year-on-year growth rate of property management revenue fell sharply by 57.6pct compared to 2022 (the current growth rate was high and the base was high due to mergers and acquisitions in 2022); ② revenue from community value-added services -6.6%; revenue from value-added services for non-owners was -41.7%; and revenue from commercial operation services was -21.2% year-on-year. The sharp decline in net profit attributable to mother was mainly due to: ① the accrued impairment provision for accounts receivable of $3.133 billion, an increase of $2,535 billion; ② impairment of goodwill and intangible assets of $1,476 billion; ③ gross margin of all businesses declined, and overall gross margin decreased by 4.3 pct to 20.5% year over year.
Property management services have been growing steadily, and the share of revenue has further increased. In 2023, the company's basic property management revenue was 24.70 billion yuan, +8.1% year-on-year. The revenue share increased 2.7 pct to 58.0% at the beginning of the comparison period, further playing a role as a ballast stone for performance.
The scale of management continues to expand, and the reserve area is sufficient. By the end of 2023, in addition to the “three supplies and one industry” business, the company's fee area was about 960 million square meters (of which line 1 and 2 accounts for 42%), +10.1% year over year; the contract area was about 1.63 billion square meters, +1.9% year over year, and the contract area covered a multiple of 1.71 x the charging area, which remained relatively high.
Net cash exceeded 10 billion yuan, and the sales management expenses ratio continued to decline. As of the end of 2023, the net cash on the company's accounts was about 11.07 billion yuan, +23.5% year-on-year, with plenty of cash. In 2023, the company's sales expenses rate was 0.8%, and the management expenses ratio was 9.1%, down 0.3 pct and 1.2 pct, respectively.
Maintaining the dividend ratio under pressure on performance. The company paid a total final dividend and special dividend of 0.2946 yuan/share, with a dividend ratio of 25% (total dividend/core net profit to mother), which is the same as in 2022. The dividend rate per share of the company's dividend payout corresponds to the current stock price of 6.05%.
Taking into account the company's accounts receivable and goodwill impairment in 2024-26, we lowered our 2024-26 net profit forecast to 1.03 billion yuan, 1.44 billion yuan, and 15.01 billion yuan, with year-on-year growth rates of +250.5%, +40.3%, and +4.9%. The current price of the company's stock is 15.9x, 11.3x, and 10.8x, respectively, corresponding to 2024-26 PE, giving it an “increase in holdings” rating.
Business contraction of related parties exceeded expectations; impairment of accounts receivable exceeded expectations; impairment of goodwill exceeded expectations