Event: revenue of Ya Life Service in mid-2022 was + 22% compared with the same period last year, and net profit returned to its mother was 7.4% year on year. On August 17, 2022, Ya Life Service issued an interim results announcement of 7.62 billion yuan in revenue, an increase of 22.0% over the same period last year. The net profit of returning to the mother was 1.06 billion yuan, down 7.4% from the same period last year. Gross profit margin was 26.9%, down 3.1pct from the same period last year, and net profit margin was 15.1%, down 5.4pct. As of June 30, 2022, the company had a management area of 530 million square meters, an increase of 39.72 million square meters over the end of 2021, and a contract area of 710 million square meters, an increase of 43.43 million square meters over the end of 2021.

Comments: the layout of the industry is balanced, the ability of independent development is strong, and the growth of aperiodic business is stable. 1) the scale is the first echelon, and the layout is balanced. The company leads the industry in management and contract scale, with 4383 projects under management as of June 30, 2022, covering 31 provinces and cities, covering 223 cities. 33% of the management area is located in the Yangtze River Delta urban agglomeration, 20% in Guangdong-Hong Kong-Macau Greater Bay Area, and 10% in Shandong Peninsula urban agglomeration. The company has established a first-mover advantage in residential, public construction and commercial office segments, forming a balanced full-format layout. As of June 30, 2022, the residential category accounted for 43% of the managed area, and the non-residential category accounted for 57% (public construction 45%, commercial and other 12%).

2) strong ability of independent development. As of June 30, 2022, the company accounted for 83.4% of the managed area of third parties; in the first half of the year, the newly signed third-party contract area of 35.6 million square meters ranked in the forefront of the industry, corresponding to the new annualized contract amount of more than 1.2 billion yuan; strong external expansion ability drives the company to achieve steady endogenous growth.

3) the growth of non-cyclical business is stable. The overall non-cyclical business income of 2022H1 increased by 34%, of which property management / owner value-added / urban service income was 4.9 billion yuan / 1.08 billion yuan / 640 million yuan respectively, an increase of 23%, 34% and 302% over the same period last year, accounting for 87% of total income from 79% of 2021H1. Extended value-added services were affected by fluctuations in the real estate market, achieving income of 990 million yuan, a decrease of 24% over the same period last year, and a proportion of total income decreased to 13%. During the period, the owners' value-added service platforms such as "51 Housekeeping Housekeeping", "Huizhijia" Community Home Decoration Company and "Le Hang Hui" Community Retail APP were operated professionally, and the business penetration increased. The value-added income of life services / home decoration / space operation / organization increased by 42%, 44%, 33%, 14% respectively.

Profit forecast, valuation and rating: the scale of the company is in the first echelon of the industry, the layout of the industry is balanced, the non-residential form has a leading advantage, the third party has strong expansion strength, and the non-cyclical business maintains medium-to-high-speed growth; the owner's value-added line is mature, the urban service plate initially has the ability of market-oriented development, and the growth rate is fast. In the first half of the year, due to the impact of the epidemic and the economic environment, the developer's income from value-added services decreased, while the impairment loss of 270 million yuan in accounts receivable (compared with 40.4 million yuan in the same period in 2021 and 160 million yuan in 2021), the company's profits declined. Taking into account the current market conditions and future expectations of real estate developers, we slightly downgrade the company's profit forecast (mainly downgrade the profit forecast of extended value-added business). We forecast that the company's homing net profit in 2022-2024 will be 2.46 billion yuan (down 11%) / 2.97 billion yuan (down 8%) / 3.28 billion yuan (down 11%). The current stock price corresponds to 2022-2024 PE is 4 times / 3 times / 3 times, the valuation is more attractive, maintain the "overweight" rating.

Risk tips: non-owner value-added services are not as expected, third-party expansion competition intensifies or affects the speed of expansion.