Event
On August 25, 2022, the company issued a performance announcement, with revenue of 3.16 billion yuan in the first half of 2022, an increase of 53.6 percent over the same period last year, and net profit of 380 million yuan, an increase of 33.4 percent over the same period last year.
Comment
The growth rate of income was higher than expected, while the growth rate of net profit was slightly lower than expected. The higher-than-expected revenue is mainly due to the higher-than-expected income from urban services and non-owner value-added services, and the lower-than-expected growth rate of net profit is mainly due to the decline in gross profit margin from 4.0pct to 25.7% compared with the same period last year. This is mainly because the proportion of urban service income with low gross profit margin in ① has increased by 5.8% from 0% in the same period last year. ② community value-added services with high gross margins were affected by the epidemic in the first half of the year. Income growth slowed, and the share of income fell 8.0pct to 17.2%.
The rate of sales and management expenses continues to decrease, and the operating cash flow is excellent. ① 1H22, the company's total sales and management expense rate of 8.4%, decreased 1.5pct compared with the same period last year. ② 1H22, the net operating cash flow of the company is 134 million yuan, which is 1.2 times of the net profit in the same period. ③ paid its first interim dividend of HK $0.074 per share, equivalent to 30 per cent of the dividend.
Outuo has excellent performance and verifies the ability of sustainable growth. The company is headquartered in Shanghai and has more layouts in eastern China. Shanghai was hit by the epidemic in the first half of the year, which hindered the development of bidding business in these regions. Even so, the company still achieved an additional contract size of 2000 million square meters through bidding in the first half of the year, and the saturated contract revenue reached 570 million yuan, which is the same as that of the same period last year. We believe that this is a testament to the strong ability of the company to expand, and it also proves that the company has the ability to continue to grow. As of June 2022, the company's area under management reached 208 million square meters, and the contract area reached 291 million square meters, an increase of 21.6% and 7.6% respectively compared with the end of 2021.
Investment suggestion
In view of the current macroeconomic pressure, we have slightly lowered our profit forecast. It is estimated that the net profit for 2022-24 will be 820 million yuan, 1.04 billion yuan and 1.28 billion yuan respectively, with year-on-year growth rates of + 33%, + 26% and + 23%, respectively, down 3.7%, 10.5% and 12.9% compared with the previous forecast. Considering that the real estate industry has not yet stabilized and the overall valuation of the property sector is still suppressed, we downgrade the company's 2022 PE to 15.0x (equivalent to 0.5 times PEG), corresponding to the latest target price of HK $8.18 per share (28% lower than the previous target price), maintaining the "buy" rating.
Risk hint
The decline in sales of Xuhui Group is more than expected; the outbound is not as expected; the impact of the epidemic is higher than expected.