Maintain the "buy" rating and lower the target price to HK $7.50: we believe that the company has high business independence, plenty of cash on hand, strong organizational optimization and iterative ability, and the ability to cross the cycle.
We estimate that the company's operating income in 2023 will be 67,009.6 billion yuan, an increase of 42.6% and 43.1% respectively over the same period last year, and its net profit will be 7.7pm 1.03 billion yuan, an increase of 24.6% and 33.9% respectively. To maintain the "buy" rating, based on the downward valuation of the property management sector as a whole, the target price has been lowered from HK $15 to HK $7.50, corresponding to 2022 PE, which is 11 times higher than that in 2023.
Steady growth in performance, the first interim dividend: 2022H1, the company's operating income was 31.6 yuan, up 53.6% over the same period last year; the net profit was 380 million yuan, up 33.4% from the same period last year; the net interest rate was 11.9%, down 1.8% from the same period last year; the company declared an interim dividend of HK7.4 cents per share for the first time, with a dividend rate of 30%, and the company's performance slightly exceeded expectations.
The gross profit margin declined due to the epidemic and the adjustment of the real estate industry: 2022H1, the company's comprehensive gross profit margin was 25.7%, down 4.2 percentage points from the same period last year, mainly due to the decline in gross profit margin of community value-added services and non-owner value-added services, and the introduction of urban service business with low gross profit margin.
The organizational management has been optimized, and the expense rate has declined: the company's incentives are tilted to front-line employees, and 72% of the salary adjustment resources in the first half of the year are spent on front-line employees, achieving a simultaneous increase in per capita efficiency and per capita income. At the same time, the Lin Jiuyun property digital platform implemented by the company is beginning to take shape, the whole process of the city extension, BU business system, management meetings and other dimensions are online, and the business management process is further optimized.
2022H1, the company's sales + management expense rate was 8.4%, down 1.5 percentage points from the same period last year.
High-quality expansion: the company continues to dig deep into the core cities and maintains rapid expansion. As of 2022H1, the company's contract area is 290 million square meters, an increase of 33.0 percent over the same period last year, of which 68 percent are located in first-and second-tier cities; and the managed area is 210 million square meters, an increase of 60.0 percent over the same period last year. Due to the epidemic in the Yangtze River Delta, the company's market expansion was limited in the first half of the year. 2022H1's new contract area from bidding was 2081 million square meters, a decrease of 1169 square meters compared with the same period last year, reflecting the increase in the average unit price of the company's new projects and the further improvement of the quality of market expansion projects.
Accounts receivable increased significantly in the short term, and cash on hand remained abundant: as of 2022H1, the company's cash and cash equivalents were 3.85 billion yuan, with abundant cash on hand; a net operating cash inflow of 134 million yuan, and a net operating cash flow / net profit of about 0.3 times, mainly due to the impact of the epidemic on collection, accounts receivable increased by 61% to 1.27 billion yuan compared with the end of 2021.
Risk tips: business expansion is not as expected; service satisfaction is reduced; collection rate is not as expected; value-added business expansion is not as expected.