Event
On February 24, 2022, Jianye New Life issued a performance forecast that the company's comprehensive net profit attributable to shareholders in 2021 is expected to grow by no less than 45% compared with the same period last year.
Comment
The performance is beyond guidance. The real estate industry was volatile in 2021, and Henan experienced sudden floods and sporadic outbreaks, making the market full of doubts about whether the company would be able to meet the previous 40% guidance on the growth of homed net profit in 2021. This announcement shows that the net profit attributable to shareholders of the company in 2021 grew by no less than 45% year-on-year, exceeding the previous guidelines. We believe that this is mainly due to: ① has a strong strength as the leader of property management in the Central Plains, and it can still achieve good scale growth in times of market fluctuations; ② actively improves quality and efficiency, and the rate of management expenses has declined in 2021, which contributes to performance growth and reflects the company's strong ability of self-adjustment.
The dividend yield is expected to exceed 10%, which is attractive. If the full-year dividend ratio in 2021 maintains the 60% level in the middle of last year, we expect the total dividend per share in the mid-plus final period in 2021 to be HK $0.5 (of which the final dividend per share is expected to be HK $0.35), with a corresponding dividend yield of 10.4%. We think that such a high dividend yield is attractive for a property management company with good cash flow.
The situation of Jianye property has improved, and the company's valuation is expected to be repaired. On February 18, 2022, Jianye Group and China Shipping Enterprise Group signed a strategic cooperation agreement. The two sides will carry out in-depth cooperation in comprehensive real estate development, urban infrastructure construction, prefabricated architectural design, general contracting of construction projects, property management supply chain and other areas with good prospects for development. We believe that this cooperation has strengthened the safety of Jianye Real Estate and increased the possibility of Jianye Real Estate to survive the industry crisis. If the subsequent property sales stabilize and pick up, the valuation of Jianye's new life is expected to be repaired.
Investment suggestion
The company's profit forecast is in line with our expectations, and we keep our profit forecast unchanged. We expect the company's 2021-23 net profit to be 620 million yuan, 880 million yuan and 1.2 billion yuan, an increase of 45%, 42% and 36% over the same period last year. The target price is 7.02 Hong Kong dollars per share, corresponding to 12.0x, 8.4x and 6.2x PE for 2021-23.
Risk hint
The decline of Jianye real estate sales is higher than expected; the extension is not as expected; the development of life services is not as expected.