The company issued an interim results announcement, 2022H1 achieved revenue of 3.163 billion yuan, an increase of 53.6% over the same period last year, and its net profit was 377 million yuan, an increase of 33.4% over the same period last year. The first-half results slightly exceeded market expectations.
With the strong growth in the scale of management, the impact of the epidemic is under pressure. As of the end of 2022H1, the area under management of the company reached 207.9 million square meters, an increase of about 60.0% over the same period last year. The rapid growth of the scale has led to a high increase in basic property service revenue. 2022H1 basic property management revenue is 1.892 billion yuan, an increase of 65.0% over the same period last year. Since 83% of the company's management area comes from third parties and 58% from the eastern region, the company's external expansion end was damaged in the severe epidemic situation in East China in the first half of the year, with a new contract area of 23.2 million square meters, a decrease of 42.5% compared with the same period last year. The epidemic situation in East China improved in the second half of the year, and the growth of the company's expansion area is expected to accelerate.
Gross profit margin fell 4.2pcts compared with the same period last year, mainly affected by the business income structure. 2022H1's comprehensive gross profit margin was 25.7%, compared with 29.9% in the same period last year. From a business point of view, the gross profit margin of basic property management remained 23.5%, the gross profit margin of community value-added services fell 3.9pcts to 42.6%, the gross profit margin of non-owner value-added services dropped 4.1pcts to 22.5%, and the gross profit margin of newly introduced urban services was 7.2%. The gross profit margin of community value-added services is higher than that of other businesses, and the decline is due to the decline in the proportion of income affected by the epidemic in intermediary business with higher gross profit margin, and the decrease in the proportion of community value-added service income to total income, resulting in a large decline in comprehensive gross profit margin. The decline in gross profit margin of non-owner value-added services is mainly affected by the weakness of the real estate development market.
The pressure on accounts receivable increases in the short term, and the company will operate steadily in the long run. As of the end of 2022H1, the company's accounts receivable was 1.27 billion, an increase of 480 million yuan over the end of last year, and the turnover days of accounts receivable was 59 days, mainly due to the impact of the epidemic on the collection of property fees and cash settlement for major customers. As of the end of 2022H1, the company's book cash is 3.85 billion yuan, short-term interest-bearing liabilities and payables are only 2.1 billion yuan, the normal operation will not be affected by the turnover pressure of accounts receivable. In addition, the company announced the distribution of an interim dividend of HK $0.074 per share, or about 40% of the net profit, which continued to return to shareholders. The company bought back a total of 2.16 million shares in July, demonstrating the company's confidence in long-term development.
Maintain the buy rating and adjust the target price to HK $7.47. According to the interim results, we have adjusted the forecast of area growth, the growth rate of value-added services and gross profit margin, and adjusted the EPS to 0.45 and 0.65 for 22-24 (compared with 0.58 for 22-23). The comparable company's PE valuation in 2022 was 12x, and the company's 22-24 performance growth rate was above average, valuing 20% at a premium of 14x, corresponding to the target price of HK $7.47. (1 Hong Kong dollar = 0.877 RMB).
Risk hint
Risk of impairment of accounts receivable. The impact of the epidemic exceeded expectations. There is uncertainty in extension.