Description of the event
The company released its 2021 semi-annual report. The company achieved revenue of 684 million yuan in the first half of the year, +54.2% year on year, and net profit of the mother was 101 million yuan, +69.6% year on year.
Outstanding performance, optimized business structure
The company achieved revenue of 684 million yuan in 2021H1, +54.2% year on year, and net profit of the mother was 101 million yuan, +69.6% year on year. The company's net profit margin was 15.0%, up 1.3 percentage points from the same period in 2020. The company's performance continues to grow rapidly, and its profitability continues to increase. By the end of the reporting period, the company had a management area of 56.24 million square meters, an increase of 36.3% over the end of 2020. The company's non-residential business management area is 26.6 million square meters, accounting for 47.3%. The company developed diversified from housing at the beginning of its establishment, successfully expanded business formats such as commercial offices, schools, hospitals, etc., and achieved a balanced and reasonable business structure.
Value-added services are growing rapidly, significantly increasing company profits
2021H1, the company's community value-added services achieved revenue of 115 million yuan, an increase of 90.7% over the previous year, accounting for 16.9% of revenue, an increase of 3.3 percentage points over the previous year. The company's value-added services for non-owners achieved revenue of 242 million yuan, an increase of 53.6% over the previous year, accounting for 35.4% of revenue. The growth rate of the company's value-added service revenue is higher than that of basic property management services. In particular, the rapid growth of community value-added services shows the company's ability to dig deeper into business potential and achieve revenue diversification.
Future growth can be expected with an injection from Zhengrong Business
On June 9, 2021, the company acquired 99% of the shares of Zhengrong Commercial Management Company, at a total cost of 891 million yuan. Zhengrong Commercial is expected to contribute 250 million yuan in revenue and more than 60 million yuan in profit in 2021. By the end of the reporting period, Zhengrong Commercial was managing 23 projects, with an area of 1.49 million square meters. The injection of high-quality assets from Zhengrong Commercial will significantly enhance the company's revenue scale and competitiveness in the field of commercial property management.
Investment advice
Zhengrong's service performance grew rapidly, market expansion performance was excellent, value-added services progressed steadily, and high-quality assets were successfully injected by Zhengrong Business. We raised the company's profit forecast. It is estimated that Zhenrong Services' revenue for 2021-2023 will be 18.2/26.9/3.96 billion yuan (the previous forecast value for 2021/2022 was $1,79/2.43 billion), and EPS was $0.31/0.45/0.62 respectively (pre-forecast value for 2021/2022 was $0.30/0.42, HK$1 = $0.83), corresponding to PE 13.3/9.2/6.6 times, maintaining the company's “increase” rating.
Risk warning
Third-party expansion falls short of expectations, labor costs rise
