Incidents:
The company released its semi-annual report. The total revenue of 2021H1 was 770 million yuan, an increase of 58.31% over the previous year. Among them, revenue from integrated property management services, government services and value-added services amounted to 670, 0.73 and 26 million yuan respectively, accounting for 87%, 9% and 3% respectively. Net profit attributable to shareholders of listed companies was $56 million, an increase of 27.91% over the previous year. During the reporting period, the port maintenance business began to contribute revenue, and the company had abundant cash flow.
Investment summary:
The shore maintenance business contributed revenue as scheduled.
The main drivers of the company's revenue of 770 million in the first half of the year were revenue contributed by new expansion projects, including port maintenance business; the second was the impact of new projects in 2020 on revenue during the reporting period due to backlog factors.
Shenzhen Tefa Port Service Co., Ltd. achieved revenue of 110 million and net profit of 13 million. The company and the Port Office of the Shenzhen Municipal People's Government signed the “Shenzhen Port Maintenance Service Entrustment Agreement” in February 2021, which was implemented by Shenzhen Tefa Port Service Co., Ltd., a wholly-owned subsidiary of the company.
The contract amount for shore maintenance business is 399 million yuan. The company fully undertook the management of 8 first-line ports and 11 former administrative control line checkpoints in Shenzhen.
Net cash flow from operating activities increased dramatically, and the company's cash flow was abundant.
Net cash flow from operating activities increased 404.69% year over year. 2021H1, net cash flow from operating activities reached $126 million.
The company increased the amount of unused own funds for cash management. Increasing the amount of own funds for cash management from no more than RMB 400 million to no more than RMB 700 million is beneficial to improving the efficiency of the use of own funds. 2021H1 has achieved investment income of 1.19 million yuan.
The company expands its scope of operations, and sufficient cash will support the new business. The company added “non-residential real estate leasing; public utility management services; hospital management; rural collective economic organization management; municipal facility management” to its original business scope.
Gross margin declined year-on-year due to the decline in subsidies due to the pandemic.
The overall gross margin of 2021H1 is 16.6%. The company's gross margins in 2019 and 2020 were 18.65% and 20.76%, respectively. The decline in subsidies and business expansion due to the decline in epidemic subsidies and business expansion led to the growth rate of operating costs exceeding the growth rate of operating income.
Segmented businesses all showed varying degrees of decline. The gross margins for integrated property management services, government services and value-added services were 14.25%, 15.11%, and 74.53%, respectively, with year-on-year changes of -3.53%, -5.28%, and -8.44%, respectively.
Standardization has been further improved, and project replicability is strong.
The company has further improved port service standards. The subsidiary Tefat Port Company has prepared the “Shenzhen Port Maintenance Service Overall Plan”, which provides documents and guidelines for the specific development of port maintenance business, and also lays a solid foundation for further refinement of port service standards in the future.
Relying on the high-tech park service experience accumulated over many years of serving benchmark cases such as the Huawei base, the company has now prepared and published the three major service standards for parks, commercial, and residential categories, as well as visualization service standards for government affairs and business.
Investment strategy: We expect the company's revenue for 2021-2023 to be 1,67, 18.3 and 2.11 billion yuan respectively, with a compound annual growth rate of 24%; the net profit of the mother is 130, 140 and 170 million yuan respectively, with a compound annual growth rate of 19%; earnings per share are 0.99, 1.12 and 1.28 yuan respectively, and the corresponding PE is 25.7, 22.8 and 19.8 times respectively.
Maintain a “buy” rating.
Risk warning: Business expansion falls short of expectations, risk reduction of property management fees, risk of recurrent epidemics.