At last, consumption begins with consumption.

Foreword: In the past, the company maintained its strategic strength and continued to invest certain resources from operating cash flow in an operating real estate industry dominated by shopping centers. Currently, the company has become a development operator with leading comprehensive strength and a leading domestic shopping center operator, which is called “finally consumption”. The company implemented a “big asset management” transformation. The gradual shift from using cash flow from development to nurturing operational real estate business to developing operational real estate business through asset management and creating a new growth model is called “starting with consumption.”

From a cyclical perspective, short-term consumption is more or less affected; however, from the perspective of a longer cycle, the role of consumption in the economy may also become more and more important, even gradually showing early cycle characteristics. The economic cycle is also “finally consumption begins with consumption”.

Development and sales business: The company's sales rank fourth in the industry. Land acquisition focuses on the core area. Decide whether to shrink land acquisition in 24 years or camera. About 40% of the company's projects in 21-22 were acquired through diversified land acquisition. Diversified land acquisition capabilities may help the company to continue to obtain high-quality land resources and strategic resources to a certain extent.

Shopping center: The company laid out the shopping center business earlier, and maintained a strong strategic strength for cash flow to support the development of the shopping center business. From 2010 to 2023, the company's estimated annual investment amount in holding properties accounted for about 8% of the total estimated operating cash inflow. The company obtained the “first-mover advantage” of luxury through earlier card slots (brand resources, location resources, operation system, etc.), and built customer stickiness from the two dimensions of space and time through collaborative development of luxury and non-luxury.

Asset management transformation: The company may rely on the ability to operate in multiple business formats such as shopping malls with strong competitiveness to open up the “investment, finance, construction and management decline” cycle, and achieve a better balance between asset portfolio growth and stability through asset portfolio rebalancing. Under the asset management model, on the one hand, the company's management ability may be “monetized”; in turn, it also provides investors with asset-level governance methods to achieve “asset governance”; on the other hand, the speed of capital turnover may also be increased, so that limited capital can be more fully invested in growth assets.

Investment advice: consider a. Subsequent new housing supply and demand relationships improved earlier than second-hand housing; b. As a leading state-owned enterprise with long-term strategic strength and excellent management capabilities, the company may benefit from future improvements in the competitive landscape of the industry; c. The company has scarce operating capacity and asset management transformation potential, giving the company 0.8 times PB in 2024, corresponding to a target price of 31.42 yuan/share (HK$34.73 per share), giving it a “Highly Recommended” rating. If the company's asset management transformation progresses smoothly, the medium- to long-term valuation level may be raised to 1.0-1.5 times PB.

Risk warning: Policy improvements fall short of expectations, the pace of industry sales recovery falls short of expectations, industry supply and demand relationships fall short of expectations, consumption growth falls short of expectations, asset management transformation progress falls short of expectations, depreciation exceeds expectations, etc.