Event
The company released its mid-term results in 2022, with operating income of 3.16 billion yuan in the first half of the year, an increase of 53.6% over the same period last year, and a net profit of 377 million yuan, an increase of 33.4% over the same period last year.
Brief comment
The performance slightly exceeded expectations. Under the expectation that the epidemic repeatedly had a negative impact on the entry of projects, the development of value-added services and costs in the property management industry in the first half of the year, the company's revenue and performance still grew rapidly, slightly exceeding our expectations. and we think it will be much better than the industry average. The main contribution to the rapid growth of the company's revenue in the first half of the year came from basic property management services, and the area under management increased by about 60% in the first half compared with the same period last year, leading to an increase of 65.0% in revenue from basic property management services. The main reason why the growth rate of net profit is lower than the growth rate of revenue is that the comprehensive gross profit margin is 25.7%, which is 4.2% lower than that of the same period last year, which is mainly caused by the decline of gross profit margin of community value-added services and non-owner value-added services. it is closely related to the epidemic and the decline of the real estate market. In addition, the company's total expense rate during the period is 8.5%, down 1.5 percentage points from the same period last year, and the level of cost control has improved. Looking forward to the second half of the year, the company's co-management ratio is still 1.4x, which can guarantee the conversion of reserve projects into performance.
The strength of outward extension has been further verified. Under the superimposed influence of multiple unfavorable factors in the first half of the year, the company still achieved a contract area of 2320 million square meters and saturated contract income of 570 million yuan, which was the same as that of the same period last year. As of the first half of the year, the company's tube area and contract area were 208 million square meters and 291 million square meters respectively, an increase of 60.0 percent and 33.0 percent respectively over the same period last year. In the first half of the year, the company's revenue from third parties reached 73%, an increase of 4.2 percentage points over the same period last year, which is still at a high level, while the proportion of managed area from third parties reached 83%, an increase of 1.3 percentage points over the same period last year. The company's third-party extension advantage has been continuously consolidated.
Value-added services have suffered from the epidemic and the downward impact of the real estate market in the short term. In the first half of the year, community value-added service income reached 545 million yuan, an increase of 4.9 percent over the same period last year, down 34.3 percent from 2021, while non-owner value-added service income reached 541 million yuan, an increase of 38.1 percent over the same period last year, down 13.6 percent from 2021. Among them, the decline in the growth rate of community value-added service income is mainly due to the epidemic superimposed on the decline of the real estate market, and the growth rate of home service, parking space sales and property brokerage business all declined. The impact is reflected not only on the revenue side, but also on the profit margin side. In the first half of the year, the gross profit margins of the company's community value-added services and non-owner value-added services were 42.6% and 22.5% respectively, down 3.9 and 4.1 percentage points respectively over the same period last year. We believe that the impact of the epidemic will be short-term, the real estate market will also enter the consolidation stage from a rapid decline, and the company's operating environment for value-added services is expected to gradually improve.
Lower earnings forecasts and target prices to keep the buy rating unchanged. We downgrade the company's profit forecast, and the EPS from 2022 to 2024 is 0.440.59 soybean 0.76 yuan respectively (the original forecast is 0.51 0.70 soybean 0.95 yuan respectively). The average PE valuation of the comparable company in 2022 is 18x, and we value the company's PE in 2022 at 18x, lowering the target price to HK $9.07 (the original target price is HK $22.84), leaving the buy rating unchanged.
Risk hint: the profit margin of extension is declining; the expansion of community value-added services is not as expected.