Introduction to this report:
The company's revenue growth in 2023 did not increase profits, mainly due to increased asset impairment and declining investment income; the 2024Q1 performance was steady in line with expectations; the company's unsold resources and land reserves were relatively abundant, and subsequent performance was guaranteed.
Key points of investment:
The company released an annual report for 2023 and a quarterly report for 2024. The leading position in Hangzhou is stable, short-term profits are affected by depreciation, and it maintains an increase in holdings rating. In 2023, the company achieved revenue of 70.44 billion yuan, +69.7% year on year, net profit to mother of 2.53 billion yuan, -32.4% year on year; 2024Q1 achieved revenue of 13.7 billion yuan, +35.9% year on year, and net profit to mother of 660 million yuan, +17.8% year on year. Considering that the industry is in an adjustment period, based on the company's inventory, sales, etc., the adjusted 2024-25 EPS was 0.98/1.10 yuan (originally 1.62/1.96 yuan), and the 2026 EPS was added to 1.22 yuan. The reference industry was given an average of 9XPE, with a target price of 8.85 yuan, maintaining an increase in holdings rating.
The company's revenue growth in 2023 did not increase profit, mainly due to asset impairment. The year-on-year growth rate of the company's revenue and net profit diverged mainly due to: 1) preparing 3.78 billion yuan for falling inventory prices; related projects were mainly distributed in Shenzhen, Tai****, etc.; 2) the reduction in the carry-over of cooperative projects and the year-on-year decline in investment income of 990 million yuan. In addition, the main position of real estate sales remained unchanged. Revenue was +70.5% year-on-year, accounting for 98.4%, and gross margin fell slightly by 0.7 pct to 16.4%.
It continues to rank first in the Hangzhou sales list. It has relatively abundant carry-over resources and strong support for subsequent performance.
The company's sales in 2023 were basically the same as in 2022 at 153.47 billion yuan, ranking 11th in the industry; 33 new land reserves were added, of which 82% were located in Hangzhou, which is conducive to consolidating regional advantages.
By the end of 2023, the company's unsettled advance housing payments were 143 billion yuan, with a cumulative land reserve (ongoing and proposed projects) of 13.2 million square meters. In 2024, the company's target sales volume is more than 100 billion yuan, accounting for 1% of the total scale of the industry, and the land investment amount will be less than 40% of the sales payback.
The cost of financing continues to fall, and we aim to reduce it to less than 4% by 2024. The company's financing costs fell by 0.4 pct to 4.2% in 2023, and the financing costs of new domestic bonds in 2024 were all less than 3.8%.
Risk warning: Demand has declined more than expected, and the competitive pattern in the Hangzhou real estate market has deteriorated