Incident: China Overseas Hongyang Group released its 2023 annual report, achieving annual revenue of 56.41 billion yuan, -1.9% YoY; net profit to mother of 2.30 billion yuan, -26.9% YoY.
Sales bucked the trend, and the market share increased steadily. The company achieved a contract sales area of 3.532 million square meters throughout 2023; achieved a contract sales amount of 42.82 billion yuan (yoy +6.2%), bucked the trend and achieved positive growth in sales; achieved equity sales of 33.56 billion yuan, and rose to the top 30 in the industry ranking. In terms of market share, the company ranked in the top three in terms of equity contract sales in 2023, with 7 cities including Shantou, Yancheng, Taizhou, Tangshan, Anqing, Zhuzhou, and Jilin.
The repayment rate was > 100%, operating cash flow increased significantly year-on-year, and rate control achieved remarkable results. While steadily expanding its sales scale, the company achieved sales repayment of 44.8 billion yuan throughout 2023, with a sales repayment rate of > 100%. Based on good repayment capacity, the company has achieved remarkable results in cash flow management. The company's annual operating cash flow recorded a net inflow of 9.098 billion yuan (486 million yuan for the full year of 2022), a significant increase over the previous year.
In terms of rate control, the company's sales rate and management rate in 2023 decreased by 0.09pct and 0.02pct to 2.75% and 1.59%, respectively, compared to last year, with remarkable rate control results.
Finances remained steady, and the three red lines continued to be “green”. By the end of 2023, the company's total cash and bank balance was $26.02 billion, accounting for 17.1% of the company's total assets, with sufficient cash reserves. In terms of the company's debt structure, as of the end of 2023: ① the short-term cash debt ratio was 1.5, which remained stable; ② the net debt ratio was 46.0%, -2.8 pct compared to the beginning of the year; ③ the balance ratio was 65.7%, -3.0 pct compared to the beginning of the year. The company's three red lines have been in the green range for 3 consecutive years, and the balance and liability structure is stable.
The equity can be sold with sufficient resources, and excellent product strength guarantees the flow rate of elimination. By the end of 2023, the company had a total land storage floor area of 18.81 million square meters, an equity floor area of 15.52 million square meters, a land storage equity ratio of about 83%, and sufficient resources for equity sales. At the same time, the company's customer satisfaction rate in 2023 was 90% (industry average 70%) and customer loyalty 82% (industry average 54%), which is far higher than the industry average. The company's excellent product delivery capabilities guarantee the future elimination of saleable resources.
Profit forecasting and valuation. The company's market share is growing steadily, the financial situation is stable, and its excellent product strength guarantees the future elimination of sufficient soil storage. We expect the company to achieve operating income of 573.8 billion, 585.6, and 59.93 billion yuan respectively in 2024-2026; net profit to mother will be 23.4, 23.9 billion yuan, and 2.45 billion yuan, respectively. The corresponding PE is 2.6x, 2.5x, and 2.5x respectively. It was covered for the first time, and a “recommended” rating was given.
Risk warning: The real estate market continues to be sluggish; policy implementation falls short of expectations; rate control is not effective.