Key points of investment
Foreign exchange losses and impairment caused a sharp decline in profits: the company's operating income of RMB 41,127 million (same below), up 35.7% year on year; gross profit of RMB 11.081 billion, up 8.0% year on year; net profit of RMB 816 million, down 60.4% year on year, mainly due to exchange loss of 622 million yuan due to inventory impairment and exchange rate fluctuations, down 485% from 2021; core net profit was 1,519 million yuan, down 17.3% year on year; gross margin and core net interest rate respectively were 26.9% and 3.7%, down 7 percentage points and 2.4 percentage points respectively from the previous year; the annual dividend was 4.8 HK cents per share, with a dividend rate of about 20%.
In 2022, the company's sales performance was superior to the industry and its share of the industry increased: the company achieved contract sales of 50.2 billion yuan, down 11% from the previous year; the corresponding contract sales area was 2.4 million square meters, and the average contract sales price was 20,931 yuan/square meter. Among them, the average contract sales price in the mainland market was 20250 yuan/square meter, an increase of 16% over the previous year, mainly due to the company's focus on core cities, and the sales share of high-energy cities increased. According to Crerey's data, the sales amount of the top 100 real estate companies fell by more than 40% year on year, and the company's performance was superior to the industry. Furthermore, the company ranked 40th in terms of full-caliber sales, up 20 places from 2021.
Focusing on the Greater Bay Area and the Yangtze River Delta, land storage structure optimization: As of 202A, the company's total land storage was 19.17 million square meters, equity land storage was 13.66 million square meters, and the land equity ratio was 71%, maintaining a high level in the industry. Among them, the share of equity land storage in the Yangtze River Delta and Greater Bay Area increased by 3 percentage points to 43%, the share of equity land storage in first-tier cities increased by 2 percentage points to 22%, and the land storage structure was further optimized. In 202A, the company added 10 new projects, corresponding to the addition of a total construction area of 1.74 million square meters, located in Shanghai, Kunshan, Ningbo, Shenzhen, Jinan and Changshu, respectively. Among them, land acquisition in the first half of the year had a sales conversion rate of 18% in that year, and the company's project turnover efficiency improved.
Financing costs have declined, and the debt structure has been optimized: as of 202A, the company's short-term cash debt ratio is 1.7; the net debt ratio is 115.9%; the balance ratio after excluding advance payments is 75.1%. The company seizes the policy window period, increases the proportion of direct financing, optimizes the debt structure, and reduces financing costs. As of 202A, the company's average financing cost was 4.27%, down 0.26 percentage points from the previous year; trusts and short-term debt accounted for 8% and 23% of interest-bearing debt, respectively, down 4 percentage points from the previous year.
Our opinion: We believe that the company's organizational structure has been optimized, the land storage structure has improved, and operational efficiency has improved in recent years. Although it is reflected in the financial statements, we are optimistic that the company's operations will continue to improve. As of April 13, the company's closing price corresponds to 0.2 times PB in 2022, and the dividend rate for the past 12 months was about 6.3%. The valuation is low. Investors are advised to pay attention.
Risk warning: The relaxation of industry regulation policies fell short of expectations, liquidity easing fell short of expectations, the recovery of commercial housing sales fell short of expectations, and the devaluation of the RMB.