The core highlight of the company

Backed by state-owned regional excellent established housing enterprises, the unique business model is steadily moving forward. Since its establishment in 1983, Yuexiu Real Estate has continued to change, with a clear strategy, based in Guangzhou and the layout of the whole country, and actively grasp the "transformation" of the industry on the basis of the soundness of the main business. 1) Regional layout: the company has formed a "1-4" nationalization strategic layout with Guangdong-Hong Kong-Macau Greater Bay Area as the core and four regions of Central China, East China, North and Southwest as the important support. 2) Investment strategy: the company continues to consolidate the "611" diversified reserve increase model, anchors key cities with potential, and actively obtains high-quality land through public auction, plus TOD, urban operation, urban renewal, state-owned enterprise cooperation, industrial land listing, M & An and other diversified and characteristic ways. 3) the diversified business goes hand in hand: the "real estate +" business is actively laid out. At present, the four major platforms of "development + operation + financialization + property service" have been built, and the business capacity of light assets has been further improved.

Real estate sales are growing rapidly; private market reserves account for more than 50%. From 10 years to 21 years, the company's sales increased from 8.9 billion yuan to 115.2 billion yuan, and CAGR was 26.3%. In 21 years, under the pressure of sales in the overall industry, the company still maintained a super-rapid growth of 20.2%, of which TOD sales were 17.9 billion yuan, an increase of 5.1% over the same period last year. The company ploughs its stronghold. Since 2009, it can be roughly divided into three stages: "expansion-contraction-re-expansion". Since 17 years, the intensity of land investment has rebounded rapidly to a new high. of the company's 21-year new land reserves, private market access accounts for 55.9%, of which TOD, "urban operation" and state-owned enterprise cooperation account for 2.3%, 25.5% and 9.3% of the new land reserves, respectively. At the same time, we actively replenish the goods with the help of the advantage of the base camp in the concentrated soil shooting. By the end of 2001, the company has a land reserve of 2711 million square meters, which can meet the company's continuous development needs for more than three years, of which the Greater Bay area accounts for about 55.0 percent, and East China, Central China, North and Southwest regions account for 12.5 percent, 17.5 percent, 10.6 percent and 4.4 percent, respectively. There are 6 TOD projects, with a total land reserve of 3.76 million square meters, accounting for about 13.9 percent of the company's total land reserve.

The territory of diversified business has been expanded. 1) Business: give full play to the advantages of the unique "dual-platform" business model. In 2021, the company realized rental income of 640 million yuan, an increase of 6.6% over the same period last year. Yuexiu real estate fund, which is 40.11% owned by the company, achieved 1.8 billion yuan in income, up 2.2% from the same period last year. 2) Recreation: by the end of the 21st, Yuexiu Kangyang has laid out two major areas: the Yangtze River Delta and the Great Bay area. Among them, there are 21 projects operated in Guangzhou, with more than 8000 beds. 3) long-term rental apartments: Yuexiu Star apartment, the first long-rent brand in 20 years, has reached 1000 apartments under the company's brand, with four product lines: youth apartments, corporate apartments, Family Apartments and elite apartments. the future development will focus on exploring the light asset model of long-term rental apartments. 4) property management: Yuexiu Service has a management area of 3887 million square meters, with revenue of 1.918 billion in 21 years, with a year-on-year growth rate of 64%. It is the only national top 100 material service enterprise that provides subway property services in Dawan area. The company deepens the layout of multiple property portfolios and gives full play to the advantages of TOD's comprehensive property management experience. TOD property generates 238 million yuan in revenue in 21 years, accounting for 12.4% of the total revenue. In 2022, it won the bid for Fuzhou Metro Line 2. Establish business relations with subway companies in Chongqing, Changsha, Kunming, Fuzhou, Nanning and Qingdao.

The revenue increases steadily and the financing cost has a significant advantage. From 10 to 21 years, the company's revenue and return net profit grew at a compound annual rate of 23.5% and 13.2%, respectively. By the end of 21, the ratio of accounts received in advance to operating income was 1.28, up 0.11 from the same period last year, and the degree of future performance guarantee was significantly enhanced. In the past two years, the company's gross profit margin has been slightly under pressure, and the 21-year gross profit margin has dropped to 21.8%. However, we believe that the company's overall profitability is supported by the regional layout of the first and second tier, abundant profit margins of the TOD project, effective control of land costs by multiple land acquisition methods, and low-cost capital advantages. At the end of 21, after excluding accounts received in advance, the asset-liability ratio of the company was 69.1%, the net debt ratio was 57.5%, the cash short-debt ratio was 1.1 times, the "three red lines" index reached green, and the overall leverage ratio remained low. In addition, taking advantage of the time window, the company successfully issued 4.15 billion yuan of corporate bonds in May 2022, of which the 3-year 2-year coupon 2.84% 2.90%, the 5-year 2-year coupon 3.35% and 3.38%, the financing cost hit a new low, and the comprehensive financing cost fell further on the comprehensive financing cost of only 4.26% in 21 years. By the end of 21 years, the company had 32.8 billion yuan in cash on hand, an increase of 16.1% over the same period last year.

Investment advice and profit Forecast

The company relies on the two major state-owned assets of Guangzhou SASAC and Guangzhou Metro Group, on the one hand, by virtue of solid shareholder credit endorsement + its own sound operation, financing costs have been continuously reduced; on the other hand, with the background advantages of Guangzhou Metro Group, the company has created a precedent in domestic TOD development and operation, taking the lead in forming a monopoly advantage in Guangzhou, and is expected to gradually replicate to other cities in the country. The company's low financing costs and unique industrial resources advantages are the basis for the company to expand its reserves and realize corner overtaking. The company implements the "611" multi-storage strategy, accounting for more than 50% of the new land storage area in the private market in 2021. At the same time, it has successfully reached the scale of 100 billion yuan under the situation of deep ploughing advantages and external development sales. Sales entered the TOP20 list for the first time from January to May in 2022, and it is also the one with the smallest decline in sales growth among TOP20 real estate enterprises. The company firmly implements the strategy of "both commercial and residential development", synchronously promotes the layout of multiple businesses such as commerce, long-term rent and property services, and enhances the company's anti-cyclicality. The company's "real estate + housing support" dual platform model makes its commercial assets have a smooth exit channel, which is conducive to the further expansion of the scale. We estimate that the company's operating income from 2022 to 2024 will be RMB 663 / 771 / 90.1 billion, an increase of 15% / 16% / 17% respectively over the same period last year; the net profit from home will be 39 / 42 / 4.6 billion yuan, an increase of 8% / 9% respectively over the same period last year; and the corresponding EPS will be 1.26 / 1.37 / 1.50 yuan respectively. The PE corresponding to the current stock price is 6.4x / 5.9x / 5.4x respectively. Cover for the first time and give a buy rating.

Main risks faced by rating

Sales and settlement are not as expected; real estate regulation is tighter than expected; financing continues to tighten; diversified business development is not as expected.