Maintain the "buy" rating and lower the target price to HK $15: the company has strong endogenous growth capacity, the third-party external development is growing steadily, and the community value-added BU model is gradually on the right track. we believe that in the long run, with the improvement of product power, service power and penetration of community value-added services, the profit structure is expected to be further optimized. We adjusted our profit forecast and estimated that the company's operating income in 2023 was 70.88 million yuan, up 50.7% and 359%, respectively, and its net profit was 865 million yuan, up 40.3% and 34.8% respectively over the same period last year. To maintain the "buy" rating, based on the downward valuation of the property management sector as a whole, the target price was lowered by 48 per cent from HK $29 to HK $15, corresponding to an 18-fold PE for 2022 and 2023.
The company's performance in 2021 is in line with expectations: in 2021, the company's total revenue was 4.7 billion yuan, an increase of 50.8% over the same period last year; its net profit was 620 million yuan, an increase of 58.1% over the same period last year; and the dividend per share was 12.99 Hong Kong cents, with a dividend payout rate of 30%. The company's 2021 performance was in line with expectations.
Affected by the adjustment of the business model and the withdrawal of the social security relief policy, the comprehensive gross profit margin decreased 3.8pps:2021 year on year, and the company's comprehensive gross profit margin decreased by 27.6%, down 3.8 pps from the same period last year. Among them, the gross profit margin of property management services decreased by 2.3pps to 23.1% year on year, mainly due to the cancellation of the social security relief policy introduced by the government in 2020 to reduce the impact of public health events on enterprises. In addition, the gross profit margin of community value-added services fell 4.7pps to 44.9% year-on-year, mainly because the company adjusted some of its home and home business models to self-management. We believe that with the community value-added business BU gradually on the right track, the increase in the proportion of community value-added business income and the use of a variety of cost-reduction and efficiency measures will offset part of the gross profit margin pressure caused by rising labor costs.
Third-party outsourcing is the main driver of scale growth: by the end of 2021, the company's managed area and contract area were 1.71 and 271 million square meters respectively, up 68.3% and 49.4% from the same period last year, and the scale growth was in line with expectations. In 2021, the company's new contract area from bidding and strategic cooperation was 6332 square meters, accounting for 67.2% of the total new contract area; the corresponding annual saturated contract revenue reached 1.187 billion yuan, an increase of 21.8% over the same period last year. Third-party extension is the main driving force of the company's scale growth.
Sufficient cash on hand: by the end of 2021, the company's cash and cash equivalents were 3.985 billion yuan, the net operating cash flow was 837 million yuan, 1.2 times the net operating cash flow covered net profit, and the cash on hand was abundant. We are optimistic that the company will continue to consolidate the advantages of external expansion in the future, while grasping the market acquisition window, landing cost-effective acquisitions, driving the steady growth of scale.
Risk tips: business expansion is not as expected; property management satisfaction is reduced; property management fee collection rate is reduced.