Incident: On April 12, the company disclosed its 2023 annual report. In 2023, the company's revenue reached 3.127 billion yuan, an increase of 20.35% over the previous year; net profit attributable to shareholders of listed companies was 160 million yuan, a year-on-year decrease of 13.83%. The company plans to pay a cash dividend of 2.85 yuan (tax included) to all shareholders for every 10 shares. The total cash dividend will account for 40.07% of the company's shareholders' net profit.
Comment:
The company's profit declined due to multiple factors such as the market environment and project operation cycle: (1) on the revenue side, the company achieved operating income of 835 million yuan in Q4 in 2023, up 21.97% year-on-year, +2.20% month-on-month, and steady revenue growth; (2) on the profit side, the company's Q4 net profit to mother reached 34 million yuan, a year-on-year decrease of 10.48%. Disaggregation of the reasons for the decline in profit in 2023: ① Due to factors such as increased market competition, changes in the company's revenue structure, and rising costs, etc., the company's gross margin in Q4 in 2023 was 9.17%, down 4.47pct year on year, down 3.87pct from month to month. The company's gross margin for the full year of 2023 was 12.82%, down 3.36pct year on year. On the one hand, due to tightening customer budgets and increased market competition, on the other hand, the region outside of Chongqing (revenue accounting for 65.02% of revenue, +4.98pct year on year, gross margin was 11.26%, year-on-year - 2.49pct) Increased revenue share and shorter operating cycles for new entrants (revenue share of 89.31% and 10.69% for mature projects, respectively, gross margin of 13.15% and 9.66%, year-on-year changes of -3.97pct and -0.49pct), compounded by a combination of factors such as a rigid increase in labor costs; ② The profit and loss share of minority shareholders of the company increased to 5.2%; (3) On the cost side, the share of profit and loss of minority shareholders increased to 5.2%; (3) On the cost side, the share of equity incentives and continuous optimization of management models The annual management rate dropped markedly. In 2023, the company's management fee rate was 5.53%, down 1.81 pct year on year, and the overall cost rate decreased by 1.67 pct year on year. The company plans to initially build a shared platform for marketing, operation, manpower, finance, internal control and other functional lines during the “Fifth Five-Year Plan” period, build a three-level management model for groups, business units and projects, and empower the system step by step.
The real estate industry declined, and competition in the property management industry continued to intensify. The scale of the company's new development projects remained strong in 2023, and the scale of key business formats increased to a certain extent: in 2023, the company won a bid amount of 1,886 million yuan, a year-on-year decrease of 969 million yuan, a year-on-year decrease of 4.2%. The decline was significantly narrower than in the previous three quarters. The company made major breakthroughs in key business formats such as schools, medical care, and financial office buildings. In 2023, the company's office/public/school/commercial residence/aviation revenue was 12.7/7.8/4.3/3.5/30 billion yuan respectively, up 19.7%/40.33%/16.09%/4.39%/7.47%, respectively.
The company achieved significant growth in urban service revenue. By product, the company's revenue from basic properties/innovative business/urban services in 2023 was 27.5/1.1/260 million yuan respectively, up 14.3%/14.3%/184.3% year-on-year respectively.
Profit forecast and investment advice: In 2023, due to factors such as increased industry competition, the company's gross margin continues to be pressured. In 2024, the company plans to consolidate its characteristic and differentiated development advantages through business format focus, city focus, and new track focus. Based on the 2023 performance, we will lower the company's performance forecast. The net profit for 24-26 is expected to be 1.8/2.1/240 million yuan, respectively (the original profit forecast for 2024-2025 was 21/250 million yuan), maintaining a “buy” rating.
Risk factors: Market competition continues to intensify, the company's project expansion falls short of expectations, project transformation falls short of expectations, gross margin continues to decline, etc.