Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 7.42 [1]. Core Views - The company reported a revenue of RMB 19.31 billion for the first three quarters, a year-on-year increase of 64%, and a net profit attributable to shareholders of RMB 760 million, up 40% year-on-year. Despite significant stock gains in Q3, inventory impairment offset these gains, primarily due to price adjustments on long-cycle projects, which also led to positive sales growth in Q3 [1][2]. - The company is expected to benefit from improved sales and performance recognition in 2025, alongside favorable real estate policies in key cities and ongoing urban renewal projects [1]. Summary by Sections Financial Performance - In Q3, the company achieved a net profit of RMB 160 million, a decrease of 77% year-on-year, mainly due to an inventory impairment of RMB 860 million that offset stock gains from investments in Guoxin Securities and Nanwei Medical, which saw price increases of 17% and 49%, respectively [2][3]. - Cumulatively, for the first three quarters, the company’s net profit grew significantly due to a 44% increase in completed real estate area and improved stock gains, totaling RMB 1.01 billion, an increase of RMB 350 million year-on-year [3]. Sales and Land Acquisition - The company’s sales amount for the first three quarters decreased by 8% to RMB 14.1 billion, but Q3 saw a 3% increase in sales amount and a 103% increase in sales area, attributed to inventory clearance and price adjustments [4]. - The company acquired two land parcels in Beijing for a total price of RMB 5.3 billion, with a land acquisition intensity of 38% and an equity ratio of 40%. A new acquisition in Changping District for RMB 2.8 billion further expands its land reserves [4]. Profit Forecast and Valuation - The profit forecast for the company remains at RMB 835 million, RMB 840 million, and RMB 857 million for 2025-2027, respectively. The estimated BPS for 2026 is RMB 11.42. The average P/B ratio for comparable companies is 0.74, while the company’s reasonable P/B is set at 0.65, maintaining the target price of RMB 7.42 [5].

Core Viewpoint - The high-priced land acquisitions during the overheated real estate market are becoming a burden for real estate companies, leading to significant declines in profit margins as these projects enter the settlement phase in 2024 [3][9]. Group 1: Impact of High-Priced Land - Many real estate companies are experiencing a notable decline in gross profit margins due to the settlement of high-priced land projects acquired in 2020 and 2021, which are now facing lower-than-expected sales prices [3][10]. - For example, Chengjian Development reported a revenue increase of 24.94% to 25.442 billion yuan, but its net profit turned from profit to loss, primarily due to inventory impairment totaling 2.745 billion yuan [3][9]. - The ongoing market adjustments and frequent impairment provisions for high-priced land projects are eroding profits for real estate companies [3][10]. Group 2: Market Conditions and Sales Strategies - The real estate market shows signs of stabilization, but companies must balance expansion and profitability through refined operations and diversified strategies to mitigate existing risks [3][9]. - The project "Longyue Hexi" in Beijing, which was launched during the peak of the market, is now facing challenges in sales due to price adjustments and market conditions, with current prices significantly lower than initial expectations [6][9]. - The average selling price of the Longyue Hexi project has dropped to around 67,000 to 70,000 yuan per square meter, compared to the initial selling price of 84,000 yuan per square meter [6][9]. Group 3: Financial Performance and Inventory Management - Chengjian Development's gross profit margin in the Beijing region fell to 15.10%, a decrease of 5.65 percentage points year-on-year, and down 20 percentage points from 2020 [10]. - The company reported a total inventory of 77.595 billion yuan, with an inventory ratio of 63.48%, indicating a high level of capital tied up in unsold properties [10]. - The frequent impairment provisions for inventory due to market downturns could lead to further risks if unsold inventory cannot be liquidated in a timely manner [10].