Leapfrog scale expansion promotes high performance growth and maintains "buying"
Hejing leisurely released its 21 annual report, with annual revenue of 3.255 billion yuan, + 115% compared with the same period last year, and net profit of 675 million yuan, + 109% compared with the same period last year, slightly lower than we had expected (net profit of 719 million). As the gross profit margin of the acquired company is slightly lower than we expected, we expect the company's EPS for 22-24 years to be 0.47pm 0.66pm 0.88 yuan (22-23 years ago it is 0.53 pound 0.75 yuan). The company's strong performance and orderly high-speed expansion plan, with reference to comparable company Wind's consensus expectation of 2022E11.6x (previous value 19.8x), we gave the company 11.6x 2022 target PE (previous value 19.9x) with a target price of HK $6.71 (previous value HK $11.90), reiterating its "buy" rating.
The substantial expansion of the management area has promoted the rapid growth of performance.
The main driving force of the company's performance is the leapfrog growth of the management area. By the end of 2021, the company's area under management has reached 206 million square meters, which is + 395% compared with the same period last year. Of the 164 million square increments, 139 million come from mergers and acquisitions.
At the same time, the external expansion area achieved a breakthrough, with a year-on-year increase of + 225% to 0.2 billion square meters. Due to the relatively low gross profit margin of the acquired company, the company's 21-year gross margin fell slightly to 37.7% compared with the same period last year. However, we believe that with the improvement of the company's value-added services and management efficiency, the gross profit margin can be maintained at the current level. We are optimistic that the company will achieve tenfold growth in 21-23 through the implementation of a high-intensity expansion plan (about 400 million square meters under management at the end of 2023, mainly through mergers and acquisitions). It will also provide momentum for future profits.
The contribution of value-added services further increased, and the project density promoted the strong growth of the management company's community value-added services sector, exceeding 600 million yuan in 21 years, + 109% compared with the same period last year, accounting for + 3.9pct to 31.2% of residential property management income. With the improvement of the density of the company's urban layout, the management efficiency is also significantly improved. The 21-year management expense rate is 10.2%, year-on-year-2.6pct. By the end of 21 years, the third party accounted for 88.3% of the total area, a year-on-year increase in 38.3pct, and a more market-oriented expansion will lay the foundation for the company's stable and sustained growth in the future.
Non-residential operating services drive future growth
In 21 years, the company focused on the expansion of non-residential property management, the proportion of non-residential management area increased from 30% in 20 years to 52%, and the revenue was significantly + 190% compared with the same period last year. Cut into the urban service track to achieve a full ecological layout.
In 21 years, the income from public property, commercial property and urban services accounted for 27%, 8% and 17%, respectively.
The company proposes that it will move from full-format to full-ecology in the future, that is, through committed to post-investment management, through mature business management brands, constantly changing management radius and comprehensive business layout, to build a multi-level service system. We believe that non-residential operating services are expected to drive the company's further growth in the future.
Risk tips: 1) labor costs increase faster than we expected; 2) access to third-party projects (especially through mergers and acquisitions) faces uncertainty; 3) adverse changes in the regulatory environment and industry regulation and control measures.