Description of the event
The company announced that in 2023, it achieved revenue of 14.77 billion yuan (+22.9%), net profit attributable to mother of 2.93 billion yuan (+32.8%), net profit attributable to core shareholders of 2.92 billion yuan (+31.2%), comprehensive gross profit margin of 31.8% (+1.7pct), and dividend ratio of 55.0% (+10.0pct).
Incident comments
Revenue and performance growth were realized as scheduled, and large dividends showed financial strength. Revenue in 2023 was $14.77 billion (+22.9%), with residential/shopping center/office businesses accounting for 65%, 22%, and 13%, up 23%, 30%, and 11% year-on-year respectively. Revenue growth was mainly due to the increase in the size and profitability of managed shopping malls, mergers and acquisitions, and market-based expansion. The net profit growth rate (+32.8%) was higher than the revenue growth rate (+22.9%), mainly due to a year-on-year increase in comprehensive gross margin of 1.7 pct to 31.8%. Among them, the positive cycle of scale, efficiency and capacity further strengthened the commercial management channel operating leverage effect. Commercial channel gross margin increased 7.7 pct to 58.4% year on year (71.9% for shopping centers, 35.6% for office buildings); due to the combination of quality improvement investment and the decline in revenue from value-added services from non-owners, the gross margin of the property management channel decreased by 1.4 pct to 17.5% year on year. In 2023, the company paid a total dividend of 0.704 yuan (+60.4%) per share, and the annual dividend rate was as high as 55% (+10pct). The large dividend highlights the company's financial strength and continues to fulfill its capital market commitment to give back to shareholders.
Shopping malls: Commercial operations are resilient, with the largest number of luxury malls in the industry, further consolidating their position as industry leaders. The company actively grasped the pace of consumer market recovery and implemented the “grab resources, grab customers, grab policies, and control expenses” business strategy. In 2023, retail sales increased 43.3% year on year to 181.2 billion yuan (30.9% year-on-year growth rate); average monthly efficiency increased 27.0% to 2,624 yuan/square meter; rental income on the owners' side was 22 billion yuan (+38.8%), and NOI increased 50.6% year on year to 142 billion yuan.
Commercial management operations are extremely resilient, and the head effect is becoming more and more prominent. In 2023, the revenue from commercial operation/sub-leasing business of shopping centers increased 33% and 65% year-on-year to 2.200/60 billion yuan, respectively. The gross margin was 76.4% (+12.0pct) and 67.7% (-0.6pct). Profitability remained high. The main reason for the high increase in revenue from the subleasing business was the opening of the first new third-party luxury shopping mall, Lanzhou Vientiane City, during the period.
In 2023, the company opened 13 new shopping malls. By the end of the year, 98 shopping malls (179 contract projects) had been opened, of which 13 luxury shopping malls ranked first in the industry, further consolidating its position as a leader in the high-end market.
Residential and other non-commercial properties: Increased scale drives revenue growth, and the share of third party management continues to rise. At the end of 2023, the company's property management channel had an area of 370 million square meters (+24.6%), and the third party accounted for 60.4% (+3.3pct) of the area under management. Contract/in-management = 1.15X. The scale growth in later stages is still guaranteed, and the probability of achieving more than 400 million square meters of managed area by 2025 is likely to be worry-free. The gross profit margin of the property management business in 2023 was 17.5% (-1.4pct). Among them, basic property management/non-social growth business decreased by 0.4 pct and 2.2 pct year-on-year to 13.6% and 34.3%, respectively, and the gross profit margin of social growth business was 26.7% (+0.1 pct). In 2023, residential property management revenue increased 23.1% year on year to 9.6 billion. Among them, basic property management/social growth business increased by 30.0% and 21.5% year on year, respectively. Scale expansion led to an increase in basic property management revenue. The pro-cyclical non-social growth business revenue fell 14.8% year on year to 830 million yuan.
Investment advice: A long-term investment target with the dual attributes of a “good track” and a “good company”. The company is a scarce leading property management leader in all business formats. Its commercial operations are strong and resilient, and the number one luxury shopping mall in the industry has further consolidated its position as an industry leader; it promotes qualitative scale growth through omnichannel, and the high-quality and rapidly growing residential property management business is gradually realized in the profit table, and it is optimistic about the long-term prospects of the “commercial management aristocracy”. The net profit for 2024-2026 is expected to be 36.7/43.9/5.14 billion, with a growth rate of 25%/20%/17%. The corresponding P/E is 14/12/10X, maintaining the “buy” rating.
Risk warning
1. The recovery in consumption fell short of expectations, and overseas shopping affected domestic luxury consumption.