occurrences
On March 28, 2024, the company published its 2023 annual report.
Key points of investment
Revenue and profit increased steadily, and gross margin remained stable
The company's revenue in 2023 was 3,954 billion yuan, +14.86% year-on-year, and 5-year CAGR was 2.9%; net profit to mother was 1.26 billion yuan, +12.84% year-on-year, and 5-year CAGR was 6.7%. Gross profit margin 58.01%, +1.48pct year on year; net profit margin 31.87%, -0.58pct year on year. At the end of 2023, the company's total loans amounted to 1,575 billion yuan, down 6.8% from 2022. Basic earnings per share were 1.25 yuan, +12.84% year over year; weighted average return on net assets was 13.53%, +0.83 pct year over year. Looking at segmented gross margin, the company's property leasing and management business revenue was 3.38 billion yuan, +6.84% year on year, gross margin was 66.41%, -0.12 pct year on year; hotel business revenue was 570 million yuan, gross profit margin was 8.09%, up 67.06 pct year on year, changing gross margin from negative to positive.
The dividend ratio has increased again, and special dividends are rewarded to shareholders
In 2023, the company plans to pay a dividend of 0.8 yuan per share (64% dividend ratio, +1pct year on year), and a special dividend of 0.5 yuan per share (raising the dividend ratio for 2019-2021 to more than 63%). The total estimated distribution plan is 1.3 yuan per share, a significant increase from 0.7 yuan per share in 2022; the total estimated cash amount for 2023 is 1.309 billion yuan, and the payout amount accounts for the net profit ratio of 104%, compared to +41 pct year on year. Based on the company's closing price on March 28, the dividend rate was 5.9%. We believe that the company's sharp increase in dividends has exceeded market expectations. In addition to increasing the level of shareholder returns, it also shows the company's confidence in its steady development and growth. The subsequent dividend ratio will continue to rise steadily from 64%.
Mall rents increased by more than 10%, and apartment rental rates increased rapidly
1) Office building: 23-year rent 638 yuan/square meter/month, YoY +1.8%; occupancy rate 95.9%, YoY -0.4pct; 2) Mall: 23-year rent 1279 yuan/m2/month, +10.4% YoY; occupancy rate 98.2%, YoY -0.6pct; 3) Apartment: 23-year rent 370 yuan/square meter/month, YoY -1.6%; occupancy rate 85.9%, YoY +12.6pct The company's office and shopping mall rents increased steadily in 2023, and the occupancy rate remained high and stable; after the renovation and upgrading of apartments in August 2020, the occupancy rate rapidly climbed from 8.4% in 2020 to 85.9% in 2023. We are optimistic that the occupancy rate of apartments will continue to grow in 2024.
Profit forecasting and valuation
We believe that the company's assets are of high quality, its resilience is outstanding, and its core competitiveness is difficult to replicate, ensuring the steady growth of the company's performance. The company's high dividend+strong cash flow attributes are prominent, and the dividend ratio has an advantage. The hotel's gross margin changed from negative to positive+the continuous increase in the apartment occupancy rate, which is expected to drive the company's profitability to increase again. As the macroeconomic economy improves in 2024, I am optimistic that the company's performance will maintain steady growth.
The entire ITC was completed in August 2017. Currently, it is in a period of stable operation. The company's future revenue is highly certain. We use the DCF valuation method to value the company in order to better reflect the company's valuation level. According to our estimates, the current value of the company is about 44.3 billion yuan, corresponding to a value of 43.98 yuan/share. The company's stock price on March 29, 2024 was 24.19 yuan/share, with a discount rate of 45.0%.
Taking into account the characteristics of the company's steady operation, asset quality, high dividend rate, etc., as well as the company's high DCF valuation discount rate, we believe that the company has long-term allocation value and should enjoy a valuation premium. We expect the company's 2024-2026 net profit to be 13.0 billion yuan, 13.6 billion yuan, and 1.41 billion yuan, corresponding to EPS of 1.29, 1.35, and 1.40 yuan/share, respectively. Maintain a “buy” rating.
Risk warning
Macroeconomic growth is under pressure; the supply of office buildings has increased.