BJ Urban Construction reported (30 October) 9M24 revenue/attributable net profit (NP) of RMB11.76/0.55bn (-27/-9% yoy). Equity investments fared well in 3Q24, and the completion of key projects in 4Q24 could further boost earnings. With its strategic asset position, BJ Urban Construction stands to benefit from the recovery in Beijing's property market and the acceleration of urban village renovation (UVR). Maintain BUY.
Equity investments stellar, project carry-over to boost earnings
The company's profits turned around in 9M24 vs 1H24, primarily due to the equity income/fair value gains of RMB0.09/0.82bn. Excluding equity investments, profit from property projects transferred in 3Q24 was relatively low. However, the company holds ample resources pending transfer, with contract liabilities covering 174% of its 2023 revenue. We thus anticipate that its 4Q24 earnings could further ramp up with the ongoing transfer of key projects such as Temple of Heaven Mansion and renovation in Linhe Village.
Property sales likely to gain from policy catalyst & the Beijing market
The company recorded RMB15.4bn in sales during 9M24, down 51% yoy, mainly affected by market adjustments and reduced inventory offerings. Following the introduction of pro-property policies in September, Beijing's new and pre-owned home transaction data improved significantly in October. We expect the company's home sales to benefit from these policy optimizations and the early recovery of Beijing's property market in 4Q24.
Continued acquisition of high-quality land in Beijing and Shanghai
During 9M24, the company acquired five plots of land, three in Beijing and two in Shanghai, at a total cost of RMB7.5bn, with a land acquisition intensity/equity share of 49/77% , marking its first foray into the Shanghai market while continuing to replenish its inventory in Beijing. With the accelerated pace of UVR and dilapidated housing redevelopment, the company's asset advantage in urban renewal is poised to further solidify, in our view.
Earnings forecast and valuation
We maintain our NP forecast but raise our 2024/2025/2026 EPS estimates to RMB0.49/0.65/0.70 (previous: RMB0.47/0.63/0.68) given share buybacks and cancellations. Considering the company's strong asset advantage in Beijing, we value the stock at 13x 2025E PE, above its peers' average of 10x on Wind consensus. Our target price is RMB8.45 (previous: RMB5.17, on 11x 2024E PE).
Risks: regional risks in Beijing market; progress in shantytown renovations and primary development projects trailing our expectations; earnings fluctuations resulting from changes in equity investments and minority interest profit.

　　公司10月30日发布三季报，1-3Q24实现营收117.6亿元，同比-27%；归母净利润5.5亿元，同比-9%。公司股权投资在Q3取得亮眼表现，Q4重点项目结转有望进一步推动业绩释放；公司凭借资源禀赋优势，有望受益于北京房地产市场复苏和城中村改造推进。维持“买入”评级。
　　股权投资取得亮眼表现，Q4重点项目结转有望进一步释放业绩
　　1-3Q24公司业绩相较24H1扭亏，主要因为直接持有的国信证券（002736CH）和间接持有的南微医学（688029CH）在Q3分别上涨36%、24%，推动Q3投资收益、公允价值收益达到0.9、8.2亿元。剔除股权投资，Q3结转的地产项目利润偏低，毛利率仅为12.9%、营业利润为负。公司待结转资源充足，Q3合同负债相对23年营收的覆盖率为174%，我们预计随着天坛府、临河村等重点项目结转的稳步推进，Q4公司业绩有望进一步释放。
　　Q4地产销售有望受益于政策催化和北京市场率先复苏
　　1-3Q公司地产业务实现销售金额154亿元，同比-51%，主要受房地产市场调整和推货减少的影响。9月地产“组合拳”出台后，10月以来北京新房和二手房网签数据同比显著改善，根据北京房管局的数据，10月1-29日北京新房、二手房销售面积同比-3%、+57%，9月分别为-45%、-4%。我们预计Q4公司销售有望受益于地产政策优化和北京市场的率先复苏。
　　持续获取京沪高质量地块，资源禀赋优势有望进一步凸显
　　1-3Q公司共拿下5宗地块，其中北京3宗、上海2宗，拿地总价75亿元，拿地强度49%，权益比例77%，在保持北京补库强度的同时，首次进入上海。此外，公司继续彰显北京资源禀赋优势：一方面，公司获取的临河村地块为此前一级开发项目的后续出让地块；另一方面，公司成为北京市通州区老城范围内平房棚户区改造项目一期实施主体，拓展管理费业务，同时也有望在该项目进入招拍挂阶段后获取资源。随着城中村和危旧房改造的提速，公司在北京城市更新方面的资源禀赋优势未来有望得到进一步凸显。
　　盈利预测和估值
　　我们维持归母净利润的预测，但由于公司进行了回购注销，相应调整24-26年EPS至0.49/0.65/0.70（前值0.47/0.63/0.68元）。可比公司平均25PE为10倍，考虑到公司在北京的资源禀赋优势、充足的待结转资源，以及北京房地产市场复苏、城中村改造推进带来的催化作用，我们认为公司合理25PE为13倍，目标价8.45元（前值5.17元，基于11倍24PE）。
　　风险提示：北京区域市场风险，棚改和一级开发项目进展不及预期的风险，股权投资、少数股东损益占比导致业绩波动的风险。

BJ Urban Construction's 1H24 revenue was RMB6.52bn (-33% yoy), with an attributable net loss of RMB0.14bn, in line with its profit forecast (vs an attributable net profit of RMB0.48bn in 1H23). Considering that key projects with potentially substantial profits, such as Temple of Heaven Mansion and shantytown renovation in Linhe Village, could be further recognized in 2H24, we maintain our 2024/2025/ 2026 EPS forecast at RMB0.47/0.63/0.68. Given the company's continued realization of its resource advantage in Beijing and its focus on core cities, we maintain our fair valuation of 11x 2024E PE (above its peers' average of 10x on Wind consensus), for our target price of RMB5.17 unchanged. Maintain BUY.

　　24H1受股权投资拖累出现亏损，维持“买入”评级
　　公司8月30日发布半年报，24H1实现营收65.2亿元，同比-33%；归母净亏损1.4亿元，位于业绩预告范围内，23H1为归母净利润4.8亿元。考虑到天坛府、临河村棚改等潜在利润丰厚的重点项目有望在24H2进一步结转，我们维持24-26年EPS为0.47/0.63/0.68元的盈利预测。可比公司平均24PE为10倍，考虑到公司持续兑现北京资源禀赋、聚焦核心城市土地，我们依然认为公司合理24PE为11倍，目标价5.17元，维持“买入”评级。
　　股权投资拖累利润，下半年有望随重点项目结转而持续改善
　　24H1公司竣工面积同比-34%至72万平，结转面积同比减少导致营收收缩，同时受到地产调整和结转结构变化影响，毛利率同比-1.5pct至18.9%。公司出现亏损，主要由于股权投资扰动：1、间接持有的南微医学（688029CH）带来投资亏损3.29亿元；2、直接持有的国信证券（002736CH）带来1.2亿元公允价值变动收益和分红收益。剔除股权投资影响后，公司地产业务实现盈利，尤其天坛府的项目公司兴瑞公司实现营收37亿元、归母净利润1亿元，我们预计随着天坛府、临河村棚改等重点项目结转的稳步推进，公司下半年业绩有望进一步改善。
　　持续获取京沪高质量地块，兑现资源禀赋优势
　　1-8月（截至30日）公司共拿下4宗地块，北京、上海各2宗，拿地总价59.04亿元，拿地强度达到40%，权益总价42.16亿元，首次布局上海，在核心城市保持了较高的拿地力度。同时，公司新增债券融资60亿元，利率低至2.21%-3.08%，低成本融资有望为公司拿地补充弹药。此外，公司继续彰显资源禀赋优势：一方面，通过招拍挂获取的北京市顺义区临河村地块为此前一级开发项目的后续出让地块；另一方面，公司成为北京市通州区老城范围内平房棚户区改造项目一期实施主体，拓展管理费业务，同时也有望参考临河村模式，在该项目进入招拍挂阶段后获取资源。
　　销售金额仍位居北京市场第二，拟注销第二轮回购股份
　　根据中指院的数据，1-7月公司实现销售金额146亿元，同比-45%，主要受到北京市场调整和推货减少的影响，但仍然位居克而瑞北京销售金额排行榜第二名。其中，天坛府、香山樾、星誉BEIJING、府前龙樾等项目位居区域销冠，对公司销售形成支撑。此外，公司拟注销2021年第二轮回购的7895万股股份，占当前总股本的3.66%，有望进一步提升股东回报。
　　风险提示：北京区域市场风险，棚改和一级开发项目进展不及预期的风险，股权投资、少数股东损益占比导致业绩波动的风险。

1H24 profits dampened by equity investments; maintain BUY
On 9 July, BJ Urban Construction announced profit warning, with its attributable net profits still dampened by equity investments. We expect its 2H24 earnings to improve with key projects seeing carry-over on track. In addition, the company acquired a new land plot in Yangpu District, Shanghai, marking sustained high intensity in land acquisitions in Beijing and Shanghai. We expect the company’s 2H24 sales amounts to see narrower yoy declines gradually. We maintain our forecasts for its 2024/2025/2026 EPS at RMB0.47/0.63/0.68 and our fair valuation of 11x 2024E PE (at par with its peers’ average on Wind consensus estimates), for our target price of RMB5.17 unchanged. Maintain BUY.
Profits to see ongoing recovery with key project carry-over in 2H24
Per its announcement, the estimated attributable net losses for 1H24 were RMB131-195mn, narrower than the RMB330mn in 1Q24. The company’s earnings continued to suffer disruptions from equity investments. Stripping out impacts from equity investments, the company’s real estate segment generated profits. We expect its 2H24 earnings to improve with key projects like Temple of Heavan Mansion/shantytown renovation in Linhe Village seeing carry-over on track.
Ongoing acquisitions of quality land in Beijing and Shanghai
Per its announcement, on 9 July, the company and Yuexiu Property (0123 HK) jointly won the bid of a land plot in Changbai Community, Yangpu District, Shanghai, with buildable areas of 31.7k sqm, total price of RMB2.23bn and an equity stake of 51%. Since the beginning of the year, the company has acquired a total of 4 plots, 2 each in Beijing and Shanghai, with a total land acquisition price of RMB5,904mn and an equity price of RMB4,216mn, pointing to sustained high intensity of land acquisition in core cities.
Ample land reserves in Beijing; sales to benefit from policy easing
Per data from the China Index Academy, the company’s sales amounts for 1H24 fell 46% yoy to RMB12.4bn, mainly due to changes in the Beijing market and weaker inventory promotions. As of end-2023, 59% of buildable areas among its land reserves were in Beijing so we estimate that the value of Beijing properties might make up a relatively high proportion of the total held for sale. According to data from the Beike Research Institute, the launch of new policy has boosted both the Beijing secondary house and new house KMI (BEKE Manager Index). We expect the company’s 2H24 sales amounts to benefit from the policy easing and to see narrower yoy declines gradually.
Risks: regional risks in Beijing market; the revocation and government-nominated projects see progress behind schedule; earnings fluctuations resulting from changes in equity investments and minority interest income.