Abstract: Gemdale Group announces its annual report for 2023. In 2023, the company will achieve a total revenue of 98.13 billion yuan, down 18.4% year on year; The net profit attributable to the parent company was RMB 890 million, down 85.5% year on year. The company plans to pay cash dividends of 0.197 yuan (tax included) for every 10 shares, with a dividend rate of 10.0%.
The company's revenue has experienced negative year-on-year growth for the first time since 2018, and its short-term performance continues to be under pressure. In 2023, the company's total revenue will decline by 18.4% year on year, due to the decline in early sales, and the company's settlement pace will slow down. In 2023, the settlement area of real estate projects will be 4.86 million square meters, down 21.1% year on year. The net profit attributable to the parent company dropped by 85.5% year on year, which was caused by the market downturn and the superposition of various factors: 1) The gross profit level of the settled real estate projects declined. 2) In 2023, the company's investment income will be 1.96 billion yuan, down 50.8% year on year. 2) In order to speed up sales and cash withdrawal, the company adjusted its operation and sales strategy according to the market situation, and the sales expense reached 2.97 billion yuan, up 5.1% year on year. 3) Financial expenses increased by 32.9% year on year to 1.12 billion yuan due to the decrease of interest income. 3) The income from changes in fair value was 400 million yuan, down 69.9% year on year, mainly due to the decrease in changes in fair value of investment properties. 4) The decrease of minority shareholders' profit and loss was significantly smaller than that of net profit, which led to the decrease of parent shareholders' profit and loss was significantly greater than that of revenue. However, in 2023, the impairment loss of the Company's assets decreased from 3.69 billion yuan in 2022 to 2.42 billion yuan. The company's short-term performance guarantee continues to be under pressure. At the end of 2023, the company's advance receipts will be 66.1 billion yuan, a year-on-year decrease of 14.3%, and the advance receipts/operating revenue will be 0.67X.
The company's profitability is under significant pressure. In 2023, the company's overall gross profit margin, net profit margin and net profit margin attributable to the parent company will be 17.4%, 3.3% and 0.9% respectively, down 3.3, 4.4 and 4.2 percentage points year on year. The ROE of the company decreased by 8.0 percentage points to 1.4% year on year due to the decline of profit margin, the reduction of total asset scale and the decline of equity multiplier. The decline in gross profit margin was mainly due to a year-on-year decline of 3.8 percentage points in gross profit margin of real estate business to 16.16%, and a year-on-year decline of 1.5 percentage points in gross profit margin of property management business to 7.64%. The three expense rates increased by 1.6 percentage points to 8.9% year on year. The profit and loss of minority shareholders of the Company was 2.31 billion yuan, down 24.6% year on year, but the proportion of minority shareholders' profit and loss in net profit increased significantly from 33.4% in 2022 to 72.2% in 2023, which is higher than that of cooperative projects in the projects generating carry forward profits of the Company this year.
The scale of the company's interest bearing liabilities decreased, but the proportion of short-term liabilities increased. By the end of 2023, the company's interest bearing liabilities had amounted to 91.91 billion yuan, a year-on-year decrease of 20.2%, of which bank borrowings accounted for 75.5% and open market financing accounted for 24.5%. In 2023, the average financing cost will be 4.36%, down 0.17 percentage points year on year. The Company's short-term liabilities accounted for 44.4% of all interest bearing liabilities, up 8.5 percentage points year on year. By the end of 2023, the Company had obtained a total credit of 252.4 billion yuan from various banks and financial institutions, and 67% of the credit lines were unused. At the end of the year, the company's asset liability ratio after excluding advances from customers was 61.3%, down 4.0 percentage points year on year, and the net debt ratio was 53.2%, up 1.0 percentage point year on year. The cash short debt ratio was 0.73X, down 0.59X year on year.
The company's short-term cash flow is under pressure. By the end of 2023, the monetary capital in the Company's consolidated statements was RMB 29.74 billion, a year-on-year decrease of 45.4%, of which the restricted capital was RMB 1.08 billion, accounting for 3.6%. In 2023, the net inflow of operating cash will be 2.19 billion yuan, down 89.0% year on year, mainly because of the decrease in sales, and the cash received from selling goods and providing services will decline 12.8% year on year to 67.4 billion yuan; At the same time, the net outflow of financing cash was 31.22 billion yuan (27.74 billion yuan in 2022), mainly because of the decrease in borrowings and the increase in debt repayment.
In 2023, the company will achieve a contract sales amount of 153.6 billion yuan and a sales area of 8.77 million square meters, down 30.8% and 14.0% year on year respectively; The average sales price was about 17509 yuan/level, down 19.5% year on year; The market share (company sales amount/national commercial housing sales amount) was 1.3%, and the market share fell 0.5% year on year. The total sales amount ranked 10th, down 3 places from 2022. From January to March 2024, the contracted sales amount will be 16.7 billion yuan, and the sales area will be 980000 square meters, down 62.1% and 59.5% year on year respectively. The sales will rank 14th, and the average sales price will be 17002 yuan/square meter, down 6.4% year on year.
The land acquisition of the company has continued to shrink significantly in recent two years, and the land reserve equity ratio is less than 50%; However, we will continue to focus on high energy cities and optimize investment allocation within the limits of income. In 2023, the company will add about 950000 square meters of land reserves in Shanghai, Shenzhen, Hangzhou, Nanjing, Xi'an, Taiyuan, Dongguan and other cities, a year-on-year decrease of 62%; The total amount of land acquisition was 12.5 billion yuan, down 66% year on year; The average floor price was 13158 yuan per square meter, down 11% year on year; The intensity of land acquisition (land acquisition amount/sales amount) is 8%, 9 percentage points lower than that in 2022. By the end of 2023, the total land reserve of the company was about 41 million square meters, a year-on-year decrease of 20.9%, and the equity land reserve was about 18 million square meters. The proportion of land reserve equity was only 44%, of which the first and second tier cities accounted for about 73%, and the proportion of first and second tier cities increased by 2 percentage points compared with the end of 2022.
The company's investment and sales contraction in the past two years has weakened the current commencement and settlement. In 2023, the newly started area of the company will be 3.13 million square meters, a year-on-year decrease of 40.0%, and only 72% of the newly started plan of this year (4.35 million square meters) will be completed; In 2023, the completed area of the company will be 13.43 million square meters, a year-on-year decrease of 5.3%, and the actual completed area will be slightly lower than the planned (13.53 million square meters). In 2024, the company plans to newly start 1.83 million square meters and complete 10.74 million square meters.
In 2023, the settlement area of the company's real estate projects will be 4.86 million square meters, down 21.1% year on year; The settlement income was 85.5 billion yuan, down 21.7% year on year; The average settlement price was 17600 yuan/level, down 0.7% year on year.
Investment advice and profit forecast:
Since 2022, the sales and investment scale of the company has significantly reduced, or affected the carrying forward scale and progress of the company in the later period. We expect that the company's settlement income and performance will remain under pressure in the short term. In addition, the cash in hand in the company's consolidated statements is close to halving, the proportion of short-term debt is higher, and the ratio of cash to short-term debt is less than 1.0X. At this stage, the company still faces considerable capital pressure, and needs to continue to pay attention to the company's subsequent sales collection and the landing of incremental financing. Considering that the current industry sales continue to be sluggish, we cut the profit forecast for 2024-2025. We estimate that the company's operating revenue from 2024 to 2026 will be 87.2/75.3/66.7 billion yuan, with year-on-year growth rates of - 11%/- 14%/- 12% respectively; Net profits attributable to the parent company were 720/560/450 million yuan, with year-on-year growth rates of - 19%/- 22%/- 20% respectively; The corresponding EPS is 0.16/0.12/0.10 yuan respectively. The PE corresponding to the current share price is 20.1X/25.9X/32.5X respectively. We downgraded the company's rating to neutral.
Main risks faced by rating:
Sales and settlement are not as expected; Less than expected; The gross profit margin declined more than expected; The implementation of incremental financing was not as expected; Debt repayment was less than expected.
