Event: Jinmao Service's revenue in mid-2022 was + 60% compared with the same period last year, and its net profit was + 94% on August 19, 2022. Jinmao Service issued an interim results announcement on August 19, 2022. The company's revenue in the first half of the year was 1.1 billion yuan, an increase of 60% over the same period last year; gross profit was 360 million yuan, an increase of 94% over the same period last year; gross profit was 32.5%, basically the same as the same period last year. As of June 30, 2022, the company has a management area of 45.5 million square meters, a contract area of 69.6 million square meters, and has cash and cash equivalents of 1.04 billion yuan.

Comments: steady increase in scale, community value-added plate strength, profitability to maintain a high level of industry 1) high-quality positioning, steady improvement in scale. The company adheres to the same high-end positioning and boutique route as China Jinmao, the controlling shareholder, and focuses on high-end property management in core cities. In the first half of 2022, the area under management increased by 9.1 million square meters, and the contract area by 12 million square meters (compared with the whole year of 2021 by 17.08 million square meters), with a steady increase in scale. On June 17, the company acquired 100% equity in the first home service with 450 million yuan to supplement a number of high-end residential and high-end business projects, and continue to consolidate the positioning of high-end services.

2) the community value-added plate makes efforts to achieve great-leap-forward development. According to the split plate, the income of the company's property management / non-owner value-added / community value-added section in the first half of the year was 540 million yuan / 310 million yuan / 250 million yuan respectively, an increase of 46%, 30% and 221% over the same period last year. During the period, the company's community value-added services developed by leaps and bounds (the annual income of the community value-added sector in 2021 was 150 million yuan), accounting for 22% of the total income, up from 9% in 2021. The four major business lines of life services, space operation, beauty home business and asset brokerage have gradually taken shape. In the follow-up, with the increase in the number of projects under management, the penetration rate is expected to be further improved, and the quality of the project under management is high. The demand for consumer services of owners is also relatively high, and there is still much room for improvement in the community value-added sector.

3) improve management efficiency and maintain a high level of profitability in the industry. In the first half of 2022, the company's sales expense rate was 1.6%, and the management expense rate was 10.7%, which was significantly better than in the past (13.8% in 2021 and 14.3% in 2020). The gross profit margin of basic property management, non-owner value-added and community value-added services was 17.2%, 47.8% and 46.7%, respectively. After listing, the company's scale expansion accelerated, gradually increasing staffing and resource allocation expenditure, but considering the company's high-energy city layout, managing high-quality projects, and subsequent increase in the proportion of income from the community value-added sector with higher gross profit margin, it is expected that the company's overall gross profit margin will still be able to maintain a high level in the industry.

Profit forecast, valuation and rating: the company is a fast-growing high-end property management target, with a revenue CAGR of 38% in 2018-2021 and a net profit of 117% in the first half of 2022. The performance can still maintain rapid growth in the first half of 2022. China Jinmao, a related party, has strong brand strength, sound operation, high delivery security, and the company's own extension ability is enhanced. Community value-added and urban service business has great potential. Taking into account the volatility of the real estate market, the uncertainty of the epidemic disturbance, and the subsequent real estate developers will not return to high growth in the short term, we slightly reduce the company's profit forecast. We forecast that the company's net profit for 2022-2024 will be 400 million yuan (down 8%) / 600 million yuan (down 8%) / 760 million yuan (down 8%). The current share price corresponds to 8x / 5x / 4x of PE in 2022-2024, with attractive valuations and maintaining a "buy" rating.

Risk hint: the epidemic repeatedly led to lower-than-expected business development, and the short-term volatility of secondary new shares was larger.