Core views

China's home building materials market still has structural opportunities. The Chengdu region has strong spending power, and the real estate market situation in Chengdu is better than the national average. As a regional leader in home furnishing stores in the Chengdu region, Fusenmei owns mature properties with a construction area of more than 1.1 million square meters in the central business district of Chengdu, fully benefiting from Chengdu's resilient real estate market and consumption of home building materials. Since its listing in 2016, the company has maintained a high dividend ratio and actively rewards shareholders. Future capital expenditure expansion is limited, and it is still expected to maintain a high dividend ratio.

occurrences

In 2023, the company achieved operating income of 1,524 million yuan, +2.79% year over year; realized net profit of 806 million yuan, +2.97% year over year; realized net profit without deduction to mother of 792 million yuan, +3.93% year over year. With 2023Q4, the company achieved operating income of 366 million yuan, -6.74% year on year; realized net profit of 190 million yuan, +7.08% year over year; realized net profit of 192 million yuan after deduction, +6.17% year on year.

Brief review

The real estate and building materials market is under pressure, and the performance of the regional market in Chengdu is better than average. Overall, the real estate market will have a lot of downward pressure in 2023, and the real estate industry chain will be affected to a certain extent as a result. Among the major cities in the country, second-hand housing transactions have become the main part, and the proportion of new housing transactions has declined. According to data from the Kerui Real Estate Research Institute, according to the housing transaction situation in 17 key cities in the country in 2023, the cities where the number of new housing units sold surpassed the number of second-hand housing units only accounted for 29.41% of the study subjects. The home building materials market still has structural opportunities. The real estate market situation in Chengdu is better than the national average, and transactions are active. Chengdu sold 140862 new housing units and 219,330 second-hand housing units in 2023. It ranked first among the 17 key residential units in the country announced by Kerry, with a total of nearly 100,000 units sold in Shanghai.

Fusenmei is a regional leader in home furnishing stores in the Chengdu region. It has a mature property construction area of more than 1.1 million square meters in the central business district of Chengdu, fully benefiting from Chengdu's resilient real estate market and consumption of home building materials. As a result, the company's revenue and profit achieved good growth in 2023, which is better than the industry average.

By business, the company achieved revenue of 1305.5816 million yuan, 9.497 million yuan, 136.212 million yuan, and 122.9059 million yuan in the market, respectively, from leasing and service, marketing and advertising planning, and decoration projects, respectively, of +6.98%, +13.98%, +15.88%, and -7.41%, respectively.

The company has maintained a high dividend ratio for a long time to give back to shareholders. Since its listing in 2016, the company has maintained a high dividend ratio. The dividend ratios from 2021 to 2023 are 66%, 103%, and 100%, respectively. As the company firmly implements the strategy of deepening regional cultivation, future capital expenditure expansion is limited, and it is still expected to maintain a high dividend ratio. Based on the closing price of March 28, 2024, the dividend rate corresponding to the company's 2023 annual dividend is 8%.

Investment advice: The company's net profit for 2024-2026 is estimated to be 817, 8.62 million yuan, and 906 million yuan, respectively. The corresponding PE is 12X/12X/11X, respectively, covered for the first time, and is rated as an “increase in holdings”.