Net profit to mother fell by 34.1%, and dividend promises boosted confidence. In 2023, the company achieved operating income of 346.83 billion yuan, an increase of 23.4% over the previous year; achieved net profit of 12.07 billion yuan, a year-on-year decrease of 34.1%, which is basically in line with the previously released performance report. The main reason for the increase in the company's revenue and the lack of profit is the decline in the gross margin carried over from the project, and the company plans to make asset impairment preparations for some projects based on current market conditions. The company announced a shareholder return plan. The dividend ratio for the next three years will not be less than 40%. In line with the majority shareholders' holdings increase plan, it will help boost market confidence.
Market share increased, and soil storage continued to be optimized. The company's sales scale is the highest in the industry. In 2023, the company achieved a sales area of 23.86 million square meters, a year-on-year decrease of 13.2%; achieved sales volume of 422.2 billion yuan, a year-on-year decrease of 7.7%, and the growth rate was superior to the industry average. The results of the company's deep urban cultivation continued to be highlighted. Sales in 38 core cities with strong certainty contributed nearly 90%, an increase of 2pc over the previous year. Among them, sales contributions from the Pearl River Delta and Yangtze River Delta exceeded 110 billion yuan and 140 billion yuan respectively. The company's market share continues to rise. In 2023, the market share was 3.6%, up 0.2 pct year on year. Among them, 38 core cities had a share of 6.8%, an increase of 0.7 pct over the previous year. There are 27 cities with a market share of more than 10%. In 2023, the company achieved continuous optimization of its resource structure. A total of 103 projects were expanded, with an expansion amount of 163.2 billion yuan. Of these, 99% were located in 38 core cities, and the residential business accounted for 95%. 40% of the newly acquired projects started in the same year and contributed more than 30 billion yuan in sales. By the end of 2023, the company had a total land storage of 77.9 million square meters, of which the stock project was 66.08 million square meters, accounting for a decrease of 8 pcts. The core 38 city area reserves accounted for 70%, an increase of 2.4 pcts, and the resource structure was continuously optimized.
Financial health, low financing costs. By the end of 2023, the company had a balance ratio of 67.1% and a net debt ratio of 61.2%, down 1.6 and 1.3 pct from the previous year, respectively, and 1.28 short cash debt. The balance of debt maturing within one year was 73.7 billion yuan, and the interest-bearing debt was 20.8%, down 0.5 pct from the end of the previous year. The company has sufficient financing space, and the financing cost is low. The comprehensive financing cost is about 3.56%, down 36 bps from the end of the previous year. The company's direct financing accounts for 16.3% of interest liabilities, and there is still plenty of room for improvement. In 2023, the company added 137.1 billion yuan in financing, and the comprehensive cost was only 3.14%. Among them, the three-year direct financing cost was reduced to as low as 3.0%.
Investment advice: Affected by factors such as declining gross margin and accrued impairment, the company's 2023 performance is under pressure. With the gradual carry-over of high-quality projects, the company's future gross margin is expected to gradually stabilize. We maintain our previous profit forecast. The company's net profit for 24-25 is estimated to be 124/14.6 billion yuan, the corresponding EPS is 1.03/1.22 yuan, and the corresponding PE corresponding to the latest stock price PE is 7.7/6.6X, respectively, maintaining a “buy” rating.
Risk warning: The decline in housing prices exceeded expectations, the company's gross margin fell short of expectations, the actual effect of policy relaxation fell short of expectations, the progress of sales recovery fell short of expectations, and the company's financial risk exceeded expectations.