23H1 performance continues to decline, maintaining the “increase in holdings” rating
The company released its semi-annual report on August 28. 23H1 achieved revenue of 174.2 billion yuan, -15% year-on-year; net profit of 2.6 billion yuan, -38% year-on-year, which is basically in line with the performance report. We maintain the EPS profit forecast of 0.25/0.43/0.49 yuan for 23-25. We believe that the company's performance in 23 years was greatly affected by liquidity pressure. The valuation should be based on 24 years, which is 8.5 times the company's average 24PE (Wind unanimously expected). Considering that the company's operations are relatively uncertain, its reasonable 24PE is 7.5 times, and the target price is 3.23 yuan (previous value is 3.01 yuan, based on 7 times 24PE), maintaining the “increase in holdings” rating.
Real estate business maintains scale, infrastructure business shrinks and improves quality
23H1 overcame liquidity pressure, and the real estate business maintained a large revenue scale: the carry-over area was -5% to 6.61 million square meters, resulting in revenue -4% to 72.2 billion yuan; due to market sluggishness, promotional returns, etc., gross margin was -7.9 pct to 13.6% year on year; as of 23H1, the company's outstanding carry-over area was still 46.82 million square meters, and it was still able to maintain its carry-over volume for more than 2 years. The infrastructure business is still shrinking, but the business structure has been optimized: the amount of new contracts signed in 23H1 was -33% to 164.1 billion yuan, of which Q2 was +36%, and the share of newly signed contracts for infrastructure projects was +13pct to 39%; revenue was -26% to 80.9 billion yuan, and gross margin was +0.2 pct to 4.8% year over year. Furthermore, the company's investment income was +1.07 billion yuan to 1.46 billion yuan year on year, mainly due to the sale of 52% of the shares in Shanghai Greenland Hotel Management Company.
The removal of commercial enterprises has led to a narrowing of the decline in sales amount. The scale of land storage is still sufficient. 23H1 continues to push for the renovation and speeding up the removal of existing commercial projects. The sales amount is -7% year-on-year to 63.3 billion yuan, which is significantly narrower than in 2022. Among them, residential sales accounted for -8pct to 47% compared to the full year of 2022, sales repayment of 57.1 billion yuan, and a repayment rate of 90%. As of 23H1, the company's total land storage area was -7% compared to the end of '22 to 146 million square meters, of which 120 and 26 million square meters were under construction and proposed, respectively. Even though no land has been acquired since '22, the scale of land storage is still quite adequate.
Continuing to reduce debt and costs, but short-term liquidity pressure is still strong. After the company promoted the overall rollover of foreign debt at the end of '22, 23H1 continued to reduce debt and costs, further reducing interest-bearing debt by 3 billion yuan to 2145 billion yuan. The sales and management expense ratio was -0.3 pct to 3.7% year-on-year, achieving a net operating cash flow of 300 million yuan. However, short-term liquidity pressure is still high. Compared with the end of '22, monetary capital was -21% to 47 billion yuan, and short-term debt coverage was -5.9 pct to 48.4%.
Risk warning: capital chain, real estate policy, downside risks in the real estate market.