Matters:
On August 25, 2023, the company announced its semi-annual report for 2023. The operating income from January to June 2023 was about 4.839 billion yuan, an increase of 56.07% over the previous year, and net profit of 28 million yuan, an increase of 219.91% over the previous year.
Commentary:
The company's revenue and profit did not increase in the first half of 2023. The gross margin was about 11.4%, down 13.4 pcts from 2022.
1) In the first half of 2023, the company's revenue was about 4.839 billion yuan, up 56.07% year on year, gross margin was about 11.4%, down 13.4 pcts from 2022 gross margin. 2) In the first half of 2023, the company's net profit was 41 million yuan, down 62.56% year on year, and net profit due to mother was 28 million yuan, up 219.91% year on year. The main reason was that minority shareholders' profit and loss in the same period in 2022 was high, resulting in a lower net profit base. In the first half of 2022, the company's net profit was 109 million yuan, and minority shareholders' profit and loss was about 100 million yuan.
The company completed a construction area of 105,100 square meters in the first half of 2023. It is presumed that the Changshu Jinlan Yayuan project was obtained in 2020. The company obtained 1 plot of residential land in Changshu in April 2020, with a planned floor area of about 710,000 square meters, a premium rate of 13.32%, a floor price of 10,888 yuan/square meter, and an average sales price of about 19,000 yuan/square meter. Affected by the downturn in the market, the project was completely eliminated only in the first half of 2023. The high land price was combined with a long sales cycle, resulting in average gross margin of the project.
The company has high land storage quality, high brand awareness in deep-cultivated cities, and rich trading experience. The sales amount for the first half of 2023 was about 5.98 billion yuan, and it has achieved 57% of the annual sales target. 1) Some local state-owned enterprises account for a relatively high share of land acquisition in the suburbs of the city, while Tiandiyuan is a high-tech zone that focuses on fundamentals and has a good real estate market. By the end of 2022, the company's land reserves were about 3.29 million square meters, of which Xi'an accounts for 47% of land storage, and land storage in high-tech zones accounts for 92% of Xi'an's land storage. 2) In the first half of 2023, the company achieved contract sales amount of about 5.98 billion yuan, an increase of 2.15% over the previous year. The Xi'an Yong'an Huafu project was sold twice against the trend; the Suzhou Pingjiang Guantang project was promoted twice and eliminated over 90%; and the Xianyang Junyuefang and Heyue Valley projects ranked first in the local market in the first half of the year. 2) The company expects to have 2 new listings to enter the market in the Xi'an High-tech Zone in the second half of 2023, namely Tang Songfang and Gao Xin Chenyue. According to estimates, the two residential projects can sell for about 7 billion yuan, which is expected to support the achievement of annual sales performance.
In the first half of 2023, only 1 plot of residential land was acquired in the Xi'an High-tech Zone. The equity was about 120,000 square meters, and there was some pressure to acquire land in the second half of the year. In January 2023, the company obtained a residential land development right in the Xi'an High-tech Zone by acquiring 55% of the shares of a project company under Xi'an Junzheng (Xi'an Jiaxing). In the first half of 2023, the company added about 122,400 square meters of real estate and planned construction area, and there was some pressure to acquire land in the second half of 2023.
Investment advice: The company has invested heavily in the core high-tech zone market in Xi'an, has accumulated a good reputation in Xi'an, has strong trading ability, and has strong sustainable advantages on both the land acquisition side and the brand side. Even without considering growth, the company's stability can be guaranteed in the Xi'an, Xianyang, and Suzhou markets, with a reasonable valuation of about 4.8 billion yuan. We expect the company's EPS to be 0.53, 0.59, and 0.64 yuan respectively in 2023-2025, and PE at the current price corresponding to 8.5, 7.7, and 7.1 respectively, maintain the target price of 5.57 yuan, and maintain the company's “recommended” rating.
Risk warning: The industry continues to shrink unilaterally, and the market declines beyond expectations.