Description of the event
The company announced that in the first quarter of 2024, it achieved operating income of 61.59 billion yuan (-10.0%), net profit to mother of 360 million yuan (-125.0%), and a comprehensive gross profit margin of 10.8% (-4.6pct).
Incident comments
The decline in revenue and gross margin dragged down performance, and the downward pressure on the industry still needs to be digested. 2024Q1 achieved revenue of 61.59 billion yuan (-10.0%). The decline in revenue was mainly due to a decrease in the amount of settlement resources for the development business, including 46.67 billion yuan (-13.8%) of real estate development revenue and 10.95 billion yuan (+12.0%) of operating services. The main reason for the loss in performance was the consolidated gross margin of 4.6pct to 10.8% year-on-year, of which the gross profit margin of the development business settlement was 10.5% (-6.7pct) and the gross profit margin of the operating business was 18.9% (+5.4pct). As of 2024Q1, the total amount of accounts received in advance by the company was 30.2 billion yuan (-38.5%), and the advance payment/annualized settlement amount = 0.76X. Gross margin is difficult to improve in the short term, and the settlement scale will continue to be under pressure. In the context of falling housing prices, the depreciation pressure on inventory is still present. Despite a marginal increase in operational business contributions, further efforts are needed for subsequent performance.
The sales scale is the top three in the industry. Under pressure from industry demand and capital chains, investing prudently is a rational choice. 2024Q1 has sales volume of 57.98 billion yuan (-42.8%), sales area of 3.911 million square meters (-37.5%), average sales price of 14,800 yuan/square meter (-8.5%), ranking among the top three in the industry. In terms of land acquisition, 2024Q1 acquired a total of 3 parcels of land, located in Yinchuan, Kunming and Guiyang, with a full-caliber land acquisition amount of 1.84 billion yuan (-82.5%), a land acquisition area of 362,000 square meters (-58.7%), and a floor price of 5080 yuan/square meter (-57.6%). The drop in floor price is related to the low energy level of the land acquisition layout. The land acquisition intensity in terms of amount and area was 3.2% (-7.2pct) and 9.3% (-4.7pct), respectively. Under pressure from industry demand and capital chains, investment tends to be prudent, making a rational choice. The new construction volume of 2024Q1 was 1.7 million square meters (-71.2%) and 2.66 million square meters (-22.8%), respectively, and completed 15.9% and 12.0% of the annual plan. As of 2024Q1, the company's unfinished land storage was 88.45 million square meters (5,676 million square meters under construction + 3.69 million square meters to be built), a year-on-year decrease of 23.7%. Industry demand has not been repaired. The company's front-end investment and construction commencement, mid-tier inventory, and back-end completion have all shrunk to a certain extent, following the trend or making rational choices in the downturn cycle.
The second curve has grown steadily, helping the company move through the cycle. The company's service business shows strong resilience, and the property sector continues to promote the high-quality development of multi-space services. 2024Q1's commercial full-caliber revenue was 2.38 billion (+2.3%), of which PrintPower's revenue was 1.43 billion (+4.8%). Logistics real estate can be leased for a total construction area of 10.202 million square meters, achieving a full-caliber rent of 970 million yuan (+1.0%). It is the largest long-term rental apartment industry, with 238,000 units operated and managed, with a cumulative total of 179,500 units opened, with a occupancy rate of 93.9%. 2024Q1 achieved full-caliber revenue of 830 million yuan (+7.3%), and the second curve grew steadily.
Investment advice: A relatively conservative management orientation in a turbulent environment is a rational choice. The company plans to strengthen bulk and equity transactions in 2024 to achieve a repayment of more than 30 billion yuan, demonstrating its determination to seize cash flow and increase safety pads. In 2024Q1, it has achieved a return of 4.2 billion yuan in bulk asset transactions; reducing leverage is the main trend in the short term. The plan is to reduce interest payment debt by 100 billion yuan in the next two years, and actively use financing instruments such as operating property loans to fully integrate into urban real estate financing coordination mechanisms to promote financing model transformation. In the medium to long term, the company still has a certain competitive advantage in terms of brand and efficiency, the leading position in the development business is still relatively stable, and the stock business value is considerable. In the context of the overall pressure on the industry, the company's core priority is to maintain the balance of the capital chain. Under the premise of overcoming liquidity pressure and successfully crossing the cycle, the company's survival value is still relatively prominent. The net profit for 2024-2026 is expected to be 109/103/99 billion, a year-on-year growth rate of -10%/-5%/-5%, and a P/E of 8.1/8.6/9.0X, giving a “gain” rating.
Risk warning
1. Industry demand is under pressure, and sales have declined sharply; 2. Housing prices continue to decline, and asset depreciation pressure intensifies.