Recently, Ming Yuan Cloud Group has upgraded his business strategy, expanding his business from residential development to the ecological chain of real estate. As the leader of real estate SaaS, we are still optimistic about its long-term development. However, due to the influence of industry regulation and liquidity, the real estate-related industries have continued to weaken recently. considering the uncertainty of the recovery of the industry in the next two years, we have lowered the company's 2022E/2023E revenue by 4% and 6%, adjusted the target price to HK $28, with a potential increase of 31%, and maintained the "buy" rating.
Brand strategy upgrading, from "real estate" to "real estate": recently, the company has carried out a strategic upgrade of its business, proposing "deeply ploughing digital technology to lead industrial upgrading" and expanding its business focus from the original residential development to digitalization of the real estate industry. The company's customers will not only be limited to residential development, but also include industrial construction, industrial operation, property services, commercial services and other areas, covering the real estate ecological chain, and further broaden the customer base.
Skyline Open platform helps to upgrade the real estate ecological chain digitally: Skyline Open platform is one of the key areas for the company to invest in the future. With its zero code / low code PaaS feature, Skyline Open platform can help real estate ecological chain enterprises rapidly deploy digital infrastructure. At the same time, based on the integration capability of SaaS+PaaS, the company can better provide large-scale customized services for large customers.
Real estate is still in a downward trend, short-term growth or pressure: affected by industry policy and liquidity, the real estate industry continues to weaken. In October 2021, the amount of investment in real estate development in China fell 5.4% from the same period last year; the area of new housing construction dropped by 33.1%; the area of land purchased dropped by 24.2%; the area of commercial housing sales dropped by 21.7%; and commercial housing sales dropped by 22.6%. Due to the decline in overall demand in the industry, short-term revenue growth is expected to be under pressure.
Maintain the "buy" rating and adjust the target price to HK $28: we will slightly lower revenue by 4.5% and 3.4% in 2022 and 2023 because of the uncertainty of the industry recovery. At the same time, as a result of the correction in the valuation of the SaaS sector, we lowered the valuation of our SaaS and ERP businesses to 20xP/S and 20xP/E, and obtained the target price of HK $28 through the segment summing valuation method, which corresponds to the 2022E/2023E annual 14.3x/10.7x Pmax S, maintaining the "buy" rating.
Investment risk: the cycle impact of the real estate industry; R & D investment may lead to lower-than-expected profits.