Although the entire real estate industry is still at the bottom of the cycle, positive signs of policy release have already appeared, and market sentiment is about to heat up. Looking at the present, the real estate industry has experienced its darkest hour in the past, and there is still no shortage of high-quality real estate companies that have withstood the pressure and maintained resilient growth with unique business models and good management.

Recently, Metro Holdings (601155.SH) handed over its 2023 performance report. According to the data, in 2023, the company achieved revenue of 11.17 billion yuan, an increase of 3.22% over the previous year, and achieved net profit of 740 million yuan. At a time of deep industry adjustments, Xincheng Holdings maintained positive profits.

1· Sound financial fundamentals, continue to consolidate the strategic advantages of two-wheel drive

Judging from this annual report card handed over by Metro Holdings, the following two core highlights are worth paying attention to.

First, the company's financial fundamentals are showing a steady trend, and operational security continues to be consolidated.

On the one hand, Xincheng Holdings' outstanding cash flow management performance provided solid support for the company's steady operation.

From an operational perspective, over the past year, while Xincheng Holdings has maintained a high repayment rate while maintaining its elimination. In 2023, the repayment amount was 81.2 billion yuan, with a repayment rate of 107%, ranking among the highest in the industry. Good performance in terms of sales repayment has strongly guaranteed the company's capital liquidity and operational stability.

At the same time, the company has plenty of cash on hand. As of the end of 2023, Xincheng Holdings' cash balance reached 19 billion yuan. The company's net operating cash flow reached 10.2 billion yuan, and operating cash flow has been positive for 6 consecutive years.

On the other hand, the company continues to achieve breakthroughs in financing, the size of interest-bearing debt has remained low, the debt structure has been continuously optimized, and financing costs have been effectively reduced.

Over the past year, the company actively paid debts to ensure that every debt was paid early or due. Domestic and foreign open market bonds totaling $10.745 billion were repaid as scheduled. The size of debt has declined, and the debt structure continues to be optimized. By the end of 2023, the company's interest-bearing debt was 57.1 billion yuan, a year-on-year pressure drop of 14.2 billion yuan; joint venture equity debt fell to 5.208 billion yuan.

The company continued to operate smoothly on the financing side and successfully issued multiple bonds during the year, effectively reducing financial costs and enhancing financial security. Over the past year, the company's average financing cost was 6.2%, down 32 basis points from the end of 2022.

It is worth mentioning that the company maintains good credit conditions in major banks and other financial institutions, providing them with strong financial support and flexible operation space. As of the end of 2023, the total amount of group credit granted by Metro Holdings from major banks was 109 billion yuan, of which 28.1 billion yuan had already been used, and there are still plenty of unused credit lines to be used.

Second, the strategic advantages of two-wheel drive continue to be highlighted, and the contribution to commercial management performance has further increased.

Xincheng Holdings has always adhered to the “residential+commercial” two-wheel drive operation model. While consolidating the basic development business market, the company continued to strengthen commercial management and achieved remarkable results.

In 2023, Metro Holdings achieved total commercial operating revenue of 11.324 billion yuan, an increase of 13.17% over the previous year, further increasing its contribution to performance.

In the past year, the company opened 22 new Wuyue Plaza, which is at the forefront of the industry. By the end of '23, the company had opened 161 Wuyue Plaza, with an average occupancy rate of 96.48%. By the end of the period, the company had laid out 198 Wuyue Plaza buildings nationwide.

Whether it is the results of projects already started or the results of commissioned management, it can be seen that the company has strong investment promotion and operation capabilities and commercial management export capabilities in the field of commercial management. Based on this, the commercial sector continues to contribute to the company's profit growth, bringing stable cash flow to the company, and continuously helping the company move through the cycle.

2· Examine the four major aspects of the revaluation of Metro Holdings

From now on, explore the value opportunities of Metro Holdings in depth. The following four key aspects are worth exploring in depth.

a· Industry recovery expectations

In the current period of adjustment of the real estate industry, the market has some uncertainty about the future direction of the industry. However, there are some signs that the real estate industry is expected to improve.

As policy support gradually strengthens, it helps the industry develop healthily and steadily around both supply and demand. At the same time, the economic environment is also gradually improving, and real estate sector valuations have bottomed out, all of which will support the industry to a new inflection point.

Earlier, the Zheshang Securities Research Report pointed out that the real estate sector currently has limited room to decline, and “undervalue+poor expectations” in 2024 will continue to drive valuation repair in the real estate sector.

b· The company's steady operating strength has been continuously verified

From the company's performance at the bottom of the industry, it is easy to see that Xincheng Holdings has shown continuous and steady operating strength, and has the characteristics of crossing the industry and market cycle.

Based on this ability, it will not only help enhance market investors' confidence in the company, but as the industry's difficulties improve, its safety base and leading edge in the industry will also be strengthened. With solid fundamentals and strong core competitiveness, Metro Holdings is expected to continue to stand out in the new industry development cycle.

c · Short-term performance and long-term growth are interesting

Looking at the real estate development business, Metro Holdings has shown great potential for growth in both the short and long term.

On the one hand, the company has abundant high-quality land storage. By the end of 2023, Xincheng Holdings had a saleable land reserve of 38.84 million square meters, of which Tier 1 and 2 cities accounted for 40% and Tier 3 and 4 cities in the Yangtze River Delta accounted for 21%. This huge land reserve provides strong support for the company's continued development in the future.

On the other hand, the company has plenty of resources to be carried over. In the past 2023, Xincheng Holdings achieved a contract sales amount of 75.983 billion yuan, with a contract sales area of 9.687,800 square meters. By the end of 2023, the company had sold 21.7012 million square meters of uncarried over area (including joint ventures), and sufficient outstanding resources provided a solid guarantee for the new year's results.

From the perspective of commercial management and operation, after 15 years of deep experience, the company's commercial sector continued to grow and became the company's second growth curve, consolidating the company's overall business development. Looking forward to the future, as the strategy continues to advance, the sector's business continues to expand, and operational capabilities continue to be explored, this business segment will also open up more room for imagination for the company's future growth.

It is worth mentioning that during the New Chamber of Commerce in October last year, Xincheng Holdings also officially announced the “In-depth Operation Strategy”, which focuses on further improving the service capabilities and operating efficiency of Wuyue Plaza to achieve greater value in Wuyue Plaza.

In the short term, the company expects to open 12 new Wuyue Plaza towers in 2024 (including projects under contract management), with a total commercial operating revenue target of 12.5 billion yuan in 2024, an increase of 10.39% over the commercial operating revenue achieved in 2023. Following this plan, we have also seen a clear path for the company's performance growth.

d · Value remodeling in two-wheel drive mode

Metro Holdings has adopted a two-wheel drive strategic model and has achieved good results in both real estate development and commercial operations.

Under this model, the company can not only obtain stable sales income through real estate development, but also obtain stable rental income and property management fee income through commercial operations.

At the same time, Metro Holdings also showed a high level of gross margin in terms of commercial management. Financial reports show that in 2023, the company's gross margin for property rental and management reached 69.90%. It is easy to expect that as the volume of this sector continues to expand, the company's performance on the profit side will continue to increase in the future.

Based on the excellent performance of this business segment with stable cash flow characteristics, the company will also effectively reduce overall operating risks and enhance profitability and sustainable development capabilities.

Compared with traditional real estate development companies, the company's model will also have greater safety and ability to overcome cycles, and have the foundation for obtaining market premiums and even reshaping valuations.

3. Conclusion

With the release of the financial report, Xincheng Holdings was well received by many institutions.

Among them, the Galaxy Securities Research Report pointed out that the company has sold sufficient unsettled resources, and its performance was locked in advance; commercial operations continued to grow, and two-wheel drive supported the company's revenue; the company was operating well and financing remained smooth. Maintain the company's “Recommended” rating.

According to the Fangzheng Securities Research Report, the company has achieved remarkable results in terms of repayment, is rich in sold and unsettled resources, and its commercial export capacity is constantly improving. The first coverage gave a “Recommended” rating.

Ping An Securities mentioned that the company's commercial real estate is operating well, and the “residential+commercial” two-wheel drive model is still expected to protect subsequent development and maintain the “recommended” rating.

According to the opinion of Dongwu Securities, Xincheng Holdings has adopted a combination strategy, focusing on high-energy cities, and steady commercial operations. As a high-quality private enterprise, the company's financing environment has improved. It is optimistic about medium- to long-term development and maintains a “buy” rating.

Judging from the optimistic logic of major institutions about Metro Holdings, on the one hand, they generally approve the company's two-wheel drive strategic model, believing that this will provide the company with a stable source of revenue and room for profit growth. At the same time, it is also highly optimistic about the company's resource reserves and commercial export capacity. In particular, it is confident in the abundance of unsold resources and the continued growth performance of commercial operations. In addition, various institutions are also optimistic about the company's financial situation and financing environment, believing that Metro Holdings is capable of meeting challenges and maintaining steady development.

From the perspective of market professionals, it is also enough to see that Metro Holdings has a good operating foundation and potential for performance growth. In the future, along with the gradual recovery of the industry, I believe the company will also achieve better performance in the new market cycle.