Abstract: Country Garden Services Holdings achieved revenue of 28.84 billion yuan in 21 years, an increase of 84.9% over the same period last year, a net profit of 4.03 billion yuan, an increase of 50.2% over the same period last year, and a core net profit of 4.61 billion yuan, an increase of 58.7% over the same period last year.

Company comment

The company's related housing enterprises, brand development, mergers and acquisitions by a variety of means to expand the scale, continue to consolidate the first leading advantage. At the end of December 21, there were 5041 projects under management, and the scale of management increased to 770 million ping + 0.85 billion ping (three supply and one industry), an increase of 102.9 percent over the same period last year; and the contract area was 1.44 billion ping + 0.85 billion square meter (three supply and one industry), an increase of 75.6 percent over the same period last year. The proportion of fee management area in first-and second-tier cities has reached 47%, an increase of 7 percentage points over the same period last year. With the support of market-oriented operation and related housing enterprises, the proportion of managed area of the third party (brand development + M & A) has increased from 27% to 55%. In 21 years, the brand extension contributed 4575 million square meters of new reserve area, which is three times the reserve area contributed by related housing enterprises. During the year, a number of large-scale mergers and acquisitions such as Garbo Service, Neighbourhood Lok and Fuliang Global were completed, accounting for 71.6% of the new 388 million square meters of management area. At the same time, the overall average property unit price rose to 2.25 yuan / month from 2.15 in 20 years, of which the external extension project rose from 2.31 yuan / month to 2.37 yuan / month (more than 2.1 yuan / month of related company projects in the same period).

The company has more diversified sources of income and is committed to the development of all categories. 1) the community value-added business has achieved high growth and the gross profit margin has been maintained at a high level. Revenue doubled for three consecutive years from 19 to 21; revenue in 21 reached 3.33 billion yuan, an increase of 92.2% over the same period last year, with a gross profit margin of 60.5%, a decrease of 4.6% over the same period last year, but 64.6% after excluding the impact of new companies purchased in 21 years, which remained at a high level. Among them, the income of local life and community media reached 11.1 yuan and 980 million yuan respectively, with year-on-year growth rates of 107% and 179% respectively. During the year, a brand-new brand "downstairs series" one-stop life service station was built, which is expected to break through 1000 points in 22 years as the entrance to the offline traffic of the community. 2) the proportion of non-owner value-added services income remains low (9.3%). The annual income was 2.68 billion yuan, an increase of 95.3% over the same period last year, of which 64.6% came from related housing enterprises. 3) three supply and one industry has realized the exploration and practice from smooth undertaking to normal operation, from property management community to serving the city, and successfully realized the goal of "one year stable, two years smooth, three years solid". The area of material management and heating is 8520 and 4230 million square meters respectively, the annual income of property management is 2.51 billion yuan, the income of heating is 1.22 billion yuan, the gross profit margin is 11.6% and 10.4% respectively, and the collection rate is as high as 93.4%. 4) the urban service should be operated as a company, and the professional ability should be deepened. The annual income reached 4.53 billion yuan, an increase of 412% over the same period last year. The city service group was set up in 21 years, focusing on five major tracks: municipal (659), space operation (6 airports in old residential areas, 16 / 14 high-speed rail transit), industrial parks (82 industrial parks, 11 cultural and tourist scenic spots), schools (47) and hospitals (21). 5) the commercial operation service products are diversified, and the output of the light asset model is promoted: stationed in more than 60 cities, managing 133 projects, and more than 2000 strategic cooperation brands. it has formed a rich product line including "Bi Le City", "Bi Le Fang", "Bi Le time" and so on. The reserve of light assets operation project is more than 3 million square meters. 6) the process of smart property is accelerated, commercial cleaning robots will be launched soon, and the SaaS platform can be further deepened. On the one hand, three cleaning service robots will be launched on March 30, 22, which will be put into use in the second half of the year and are expected to save 35% of the manpower of the current 27000 cleaners. On the other hand, the community media SaaS platform "Garden pass", which is open to the property industry, has signed 438 property companies in 21 years, with a total of 254 million square meters of contracted customers.

Financial indicators: while the income growth rate is in the leading position in the industry, the profit margin remains at a high level despite the decline, and the cash flow is abundant. In 21 years, the company achieved revenue of 28.84 billion yuan, an increase of 84.9% over the same period last year, a net profit of 4.03 billion yuan, an increase of 50.2% over the same period last year, and a core net profit of 4.61 billion yuan, an increase of 58.7% over the same period last year. Revenue from related party transactions with Country Garden Holdings as a proportion of total revenue continued to decline, from 17 per cent in 18 years to 7 per cent in 21 years, lower than the level of the industry. The overall gross profit margin fell 3.3 percentage points to 30.7% compared with the same period last year, mainly due to 1) the abolition of social security relief policy; 2) continued innovation of infrastructure and increased investment in intelligent transformation of facilities; 3) the proportion of urban services with low gross profit margin increased. Excluding urban services and new business operation services, gross profit margin fell 1.4 percentage points to 32.7% from 34.1% in 20 years. Among them, the gross profit margin of basic property services decreased by 4.3 percentage points to 30.3% compared with the same period last year, mainly due to 1) cancellation of social security exemption; 2) continued innovation of infrastructure and increased investment in intelligent transformation of facilities. The gross profit margin of community value-added services decreased by 4.6 percentage points to 60.5% compared with the same period last year. This is mainly due to 1) the relatively low gross profit margin of newly purchased companies within the year; 2) the gradual increase in the scale of purchase and sales business with relatively low gross profit margin; and 3) the decline in the fierce competition in the media sector affected by the epidemic. The gross profit margin of non-owner value-added services fell 4.6 percentage points year-on-year to 40.9%, mainly due to the cancellation of social security deductions and the increase in labor costs. Although the gross profit margin has declined, it remains high, and with the merger and acquisition business integration and technology empowerment, gross profit margin is expected to rise steadily in the future. At the end of the year, the net accounts receivable of the company was 10.3 billion yuan, an increase of 143% over the same period last year, of which the third party was 9.7 billion. This is mainly due to the increase in accounts receivable of the companies that are the subject of mergers and acquisitions (Garbo Service 1.1 billion, Fuliang Global 1.25 billion, Manchukuo + Dongfei 1.4 billion, etc., 80% in one year) Other receivables increased by 582% to 4.19 billion yuan compared with the same period last year, mainly due to the additional 2.33 billion yuan of equity pledge loans provided to third parties during the year and the increase in receivables brought about by new business expansion during the year. We believe that receivables will be improved with the active promotion of the company's "three-payment first-class work (that is, recovery period, collection period, prepayment future, integrated cash flow control) and the completion of formal delivery of acquisitions. The company's monetary capital is 11.62 billion yuan, down 23.6% from the same period last year, but abundant cash lays a good foundation for future mergers and acquisitions and intelligent property construction and development.

The company firmly implements the "five-year hundreds of billions" plan, continues to focus on the strategy of "big property + big community", and opens up more room for development by means of cooperation, M & An and endogenous development. finally realize the enterprise vision of the international leading new property service group. The company's overall revenue is expected to exceed 100 billion yuan in 2025, based on which the annual compound growth rate from 2021 to 2025 will reach 36.5%. Among them, the scale targets of basic property services, value-added services, urban services and business operation and management income are 500,350,100 and 10 billion yuan respectively, with a compound growth rate of 38.0%, 80.1%, 21.9% and 97.7% respectively from 2021 to 2025.

Investment advice and profit Forecast

As the leading comprehensive property management leader in China, the company maintains rapid revenue growth, more diversified structure, short-term profit margins decline but still remain high, with the merger and acquisition business integration and technology empowerment still have room for improvement in the future. Through a clear strategic layout and linked business system, the company already has four core competencies: service ability, scientific and technological ability, channel ability and investment ability, and always focuses on "big property + big community". Community value-added services, non-owner value-added services, urban services, three supply and one industry, business operation services and other omni-directional expansion of their own growth dimensions To ensure that the company continues to have a strong driving force for performance growth and room for market capitalization improvement. We estimate that the company's revenue from 2022 to 2024 will be 448 / 635 / 89.2 billion yuan, an increase of 54% / 42% / 41% respectively over the same period last year, and the net profit will be 57 / 81 / 11.6 billion yuan respectively, an increase of 41% / 43% over the same period last year. The corresponding EPS is 1.69 / 2.42 / 3.46 yuan respectively. The PE corresponding to the current stock price is 17x / 12x / 8x respectively. Maintain the buy rating.

Major risks to ratings:

Country Garden Holdings real estate development growth slowed down or delivery fell short of expectations; outbound development fell short of expectations; income tax fluctuations will affect net profit and net profit margin; smart property development and acquisition progress is not as expected.