The Zhitong Finance App learned that Guohai Securities released a research report stating that it maintains the “buy” rating of Shenzhen International (00152). Operating revenue for 2024-2026 is HK$16.589 billion, HK$17.250 billion and HK$17.789 billion, respectively, and net profit to mother is HK$3.802 billion, HK$3.878 billion and HK$3,968 billion, respectively, with corresponding dividend rates of 13.22%, 13.48% and 13.79%, respectively. The company holds high-quality assets, continues to stabilize high dividends, and has a clear path for future value return.

Event: On March 28, 2024, Shenzhen International announced its 2023 annual results: In 2023, the company achieved operating income of HK$20.711 billion, an increase of 32.70% over the previous year, and completed net profit of HK$1,902 billion, an increase of 51.66% over the previous year.

The report's main points are as follows:

The high-speed port built a profit base, and the transformation and upgrading of the logistics park achieved a net profit of HK$1,746 billion to mother

In 2023, the company's high-speed and port business continued to contribute stable profits. The above sectors contributed a total net profit of HK$1,092 billion to the mother, building a profit base for the company. Since no REITs projects were listed in the company's logistics business in 2023, the logistics business achieved net profit of HK$532 million, a year-on-year decrease of 62.69%. Meanwhile, the logistics park transformation and upgrading business made a significant contribution to the company's performance. This sector achieved net profit of HK$1,746 million, mainly due to the completion and delivery of the Qianhai residential project in Yicheng Qiwanli. The company confirmed revenue of about HK$5.5 billion and realized after-tax revenue of HK$1,563 billion. At the same time, according to accounting standards, there was no need to confirm further losses due to the associated company Shenzhen Airlines in 2023. In the end, the company completed net profit of HK$1,902 million, up 51.66% year on year.

The main logistics industry is growing steadily, and land modification and REITs sales continue to contribute to profit elasticity

As the eighth largest logistics real estate company in China, by the end of 2023, the company's logistics park has a planned land area of more than 10 million square meters, of which the land area for which it has obtained management rights is about 9.08 million square meters and the operating area is about 4.76 million square meters. The company plans to operate the logistics park to reach 8 million square meters by the end of 2025, and the logistics business is growing steadily. At the same time, the company fully exploited the land value of logistics parks through innovative business models of “investment, construction and management” and “investment, construction and finance management”, and continued to contribute to profit flexibility through land modification and REITs.

① In terms of investment, construction and management, real estate projects such as “Meiling Pass”, “Qianhai”, and “South China Logistics Park” have been realized year by year. Among them, the Qianhai project has released a total of about RMB 14.219 billion in pre-tax revenue six times over the past few years, helping the company's performance to grow steadily. As real estate development for the Qianhai project came to an end, at the end of October 2023, land preparation for the company's South China Logistics Park was officially implemented. The company received a total of 1,058 billion yuan in eviction compensation plus 108,700 square meters of reserved land, of which 508,300 square meters of commercial housing were planned to be sold. According to the bank's estimates, the project is expected to generate 15.771 billion yuan in after-tax revenue for the company.

② In terms of investment, construction and finance management, by the end of 2023, Shenzhen International had completed the REITs listing process. Among them, the Nanchang Integrated Logistics Port confirmed net profit of HK$175 million; the second phase of the Hangzhou project and the Hefei Feidong project contributed a total net profit of HK$657 million to the mother. Currently, the company is actively promoting the issuance of public REITs for the first phase of the Hangzhou project and the Guizhou project, and has made phased progress.

Continued stable high dividends, and undervaluation provides a margin of safety

The company attaches great importance to shareholder returns and promises to distribute core business profits of no less than 30% each year, but the company's actual dividend ratio will remain around 50% all year round, with a total dividend of HK$9.383 billion over the five-year period 2018-2022. In 2023, the company plans to pay HK$0.40 per share, with a total dividend of HK$957 million, with a dividend ratio of 50%. If the company continues to maintain a 50% dividend ratio, the bank expects the company's dividend rates of 13.22% and 13.48% in 2024 and 2025, respectively; the corresponding PE is 3.78 and 3.71 times, respectively. The value return path for undervalued high-dividend assets is clear.