Event: Jianye Xinlife's net profit in mid-2022 was + 11% compared with the same period last year, and the interim dividend per share was + 46% on August 22, 2022. Jianye New Life issued an interim results announcement in 2022. The company's income in the first half of the year was 1.57 billion yuan, an increase of 0.1% over the same period last year. The net profit was 290 million yuan, an increase of 11.4% over the same period last year; and the interim dividend per share was 21.1 Hong Kong cents, an increase of 45.5% over the same period in 2021.

Comments: high-density layout in Henan, basic property management revenue growth is significant, generous dividend returns to shareholders 1) Henan region high-density layout, the scale of management has improved steadily. As of June 30, 2022, the company's managed area was 142 million square meters, an increase of 6.22 million square meters over the end of 2021, and the contract area was 255 million square meters, an increase of 17.85 million square meters over the end of 2021. The company's business covers 18 prefecture-level cities and 101 of 102 county-level cities in Henan, serving more than 2.4 million owners. In Henan Province, the average management area in a single city of the company is 7.11 million square meters, and the contract area is 1283 million square meters. The high-density layout is convenient for the company to carry out intelligent and regional management, which is conducive to improving efficiency and reducing costs. The management expense rate of 2022H1 Company is 6.7%, keeping a low level in the industry.

2) the revenue of property management has increased significantly, and the demand for life services has yet to be released. In the first half of the year, the company's property management income increased significantly with the expansion of the property management scale, and the income from basic property management services reached 820 million yuan, an increase of 33.2% over the same period last year, accounting for 52.4% of the total income from 36.8% in 2021. Affected by the epidemic, consumer demand has slowed down, and the sales income of consumer service platform "Jianye +" has declined, resulting in a 48.7% drop in income from the life services sector compared with the same period last year. As of June 30, 2022, the "Jianye +" platform had about 6.89 million registered users, and the total transaction volume (GMV) in the first half of the year reached 650 million yuan. The impact of the subsequent epidemic gradually weakened, the macroeconomic situation improved, residents' consumer confidence boosted, demand released, and the living services sector is expected to usher in an improvement in income.

3) Jianye Group has an excellent brand in Henan, with assets and sales exceeding 100 billion yuan in 2019, and its business covers 120 counties and cities above county level in Henan Province. On July 21, 2022, Henan Railway Construction Investment Group and Jianye Group formally signed a strategic cooperation agreement, the provincial state-owned railway construction investment shares in Jianye real estate, the endorsement of state-owned enterprises to increase trust, Jianye real estate capital strength is expected to improve, Jianye new life related party transactions are expected to improve, and is expected to obtain high-quality cooperation projects, business development space to expand.

Profit forecast, valuation and rating: the company ploughs the Greater Central Plains, has the advantage of scale and good brand reputation, and maintains medium-and high-speed growth in basic material management. Due to the short-term epidemic and macroeconomic impact, the income related to life services and value-added services decreased. Considering the uncertainty caused by the disturbance of the epidemic, the recovery of demand for related business services needs further observation. We downgrade the company's profit forecast. We forecast that the company's 2022-2024 net profit will be 710 million yuan (down 13%) / 840 million yuan (down 16%) / 990 million yuan (down 18%). The current stock price corresponds to a PE of 5x / 5x / 4x from 2022 to 2024. Considering that the related parties of the company are owned by state-owned assets, the business and financial risks are reduced, and the security of Jianye's new life development is further improved, which will help to improve the valuation level (property management of the state-owned enterprises with the same qualifications); and the company pays attention to the returns of shareholders, maintains a high dividend rate in the industry (2021, 2022H1 are close to 80%), has high investment value, and maintains the "overweight" rating.

Risk hint: the epidemic repeatedly led to lower-than-expected business development, and intensified market competition led to lower-than-expected expansion.