Yuexiu Real Estate’s “three red lines” remain in the green, and well-known investment banks maintain a “buy” rating
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In 2023, amid multiple challenges such as the continued adjustment of the real estate industry and the recovery of consumer confidence, Yuexiu Real Estate has become one of the few real estate companies in the industry to maintain positive sales growth with its active investment strategy and solid financial performance.
On March 26, Yuexiu Real Estate Co., Ltd. (00123.HK, hereinafter referred to as “Yuexiu Real Estate”) released its 2023 annual performance report. During the reporting period, Yuexiu Real Estate achieved operating income of 80.22 billion yuan (RMB, the same below), a year-on-year increase of 10.8%. Core net profit reached 3.49 billion yuan, and the dividend payout ratio based on core net profit was 40%.
Yuexiu Real Estate’s performance and sales performance have been recognized by many well-known investment banks and securities institutions at home and abroad. CICC, Ping An Securities, Guojin Securities, Shenwan Hongyuan, Citibank, Kaiyuan Securities, Guosen Securities, Soochow Securities, Daiwa Capital Markets, etc. have all maintained “buy”, “recommend” and “outperform the industry” on Yuexiu Real Estate ” and other positive ratings.
Sales grow against the trend, with target achieved by 2024Positive sales growth
In 2023, Yuexiu Real Estate adhered to the steady investment strategy of “one city, one policy” and “living within one’s means”, focusing on advantageous areas and core cities and continuing to deepen its development, achieving a cumulative contracted sales amount of 142.03 billion yuan for the year, a year-on-year increase of 13.6%. Among them, the Greater Bay Area contributed more than 50% of Yuexiu Real Estate’s sales, a year-on-year increase of 20%; the East China region’s full-year contribution accounted for 26%. Yuexiu Real Estate’s management announced that its contracted sales target for 2024 is expected to be 147 billion yuan.
Ping An Securities released a research report stating that Yuexiu Real Estate’s salable value in 2024 is approximately 270 billion yuan. Currently, 95% of its land bank (by area) is located in first- and second-tier cities. The combination of sufficient value and advantageous layout is expected to support the realization of the 2024 sales target. CICC stated that Yuexiu Real Estate has a superior land bank layout, solid product strength and a market-oriented incentive system. It believes that Yuexiu Real Estate’s sales in 2024 are expected to achieve steady growth.
Shenwan Hongyuan, Soochow Securities, HSBC Bank, and CCB International stated that Yuexiu Real Estate has proposed a sales target of 147 billion yuan in 2024, a year-on-year increase of 3.5%, demonstrating development confidence.
Stick to valuable investments and use multiple channelsReplenish high-quality land reserves
In 2023, Yuexiu Real Estate will add a total of 28 new land parcels in 11 first- and second-tier cities through the “6+1” diversified reserve growth model, with a total construction area of approximately 4.91 million square meters and an additional salable value of approximately RMB 130 billion. As of the end of 2023, Yuexiu Real Estate has developed a total of 9 TOD projects in Guangzhou and Hangzhou, and the total land reserve of TOD projects reached 3.31 million square meters.
CICC stated that Yuexiu Real Estate will replenish its high-quality land reserves in 2023 through diversified reserves addition channels such as TOD, industrial land acquisition, state-owned enterprise cooperation, and urban renewal. The newly acquired projects are all located in ultra-high or high-energy cities, consolidating resource endowments; it is expected that In 2024, it will still rely on its financial advantages to choose opportunities to replenish its high-quality land bank. Ping An Securities said that Yuexiu Real Estate has made steady progress during the industry downturn. Its financing advantages and diversified reserve expansion model have helped break through the counter-cyclical land acquisition. It is among the best in the industry in terms of land acquisition and is expected to further expand its market share in the industry reshuffle. Shenwan Hongyuan said that Yuexiu Real Estate’s new land parcels in 2023 will all be located in first- and second-tier cities, adhering to six-in-one diversified land acquisition, with diversified land acquisition accounting for 53%, and land acquisition for TOD and urban operations have emerged.
Citibank, Guosen Securities, Kaiyuan Securities, and Soochow Securities stated that Yuexiu Real Estate has good fundamentals, maintains high-quality growth in core cities, has sufficient land reserves and high-quality TOD projects and urban renewal projects, and has consolidated its position in the Greater Bay Area. It has the leading position in the market and the largest market share in Guangzhou, and has the ability for sustainable growth. HSBC believes that the value of Yuexiu Real Estate’s high-quality land reserves will be unleashed in the next few years.
Financing costs continue to decline and financial status remains solid
The annual report shows that Yuexiu Real Estate’s finances continue to remain stable, and the “three red lines” data remain in the green. As of the end of 2023, Yuexiu Real Estate’s asset-liability ratio, net borrowing ratio and cash short-term debt ratio excluding advance receipts were 67.4%, 57.0% and 2.01 times respectively; the weighted average borrowing cost for the year fell 34 basis points year-on-year to 3.82%, and the average at the end of the period Borrowing costs further dropped to 3.63%; the rights issue was completed, with net proceeds of approximately HK$8.3 billion, and the rights issue was oversubscribed by 1.15 times.
Shenwan Hongyuan, Soochow Securities, and Guosen Securities stated that Yuexiu Real Estate’s financing costs are leading in the industry, its debt structure is good, and it can obtain high-quality land more easily in the current market environment. CICC and CCB International stated that Yuexiu Real Estate, as a state-owned enterprise in Guangzhou, has outstanding financing advantages. Thanks to the rights issue to increase its equity and efficient payment collection, it has consolidated its stable financial performance, maintained a good credit rating and the “Three Roads”. Red line” green gear. Ping An Securities stated that Yuexiu Real Estate has made flexible use of overseas RMB free trade zone bonds and dim sum bonds to reduce overseas financing costs, and the rights issue has been over-subscribed. These financing advantages have supported the development of Yuexiu Real Estate.
In addition, CICC believes that Yuexiu Real Estate’s valuation is less than one standard deviation of the central level since 2016, which is highly attractive. Ping An Securities stated that Yuexiu Real Estate is one of the few real estate companies in the industry that maintains high investment intensity and positive sales growth. It has accurately acquired land in core cities, combined with strong shareholder background and financing advantages, and still maintains a “recommended” rating.
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