Hong Kong property management stocks strengthened collectively in early trading$SUNAC SERVICES (01516.HK)$Increase by more than 7%$Country Garden Services Holdings (06098.HK)$Up nearly 6%$Binjiang Service Group (03316.HK)$、$Ever Sunshine Lifestyle Services (01995.HK)$It's up more than 4%.

According to CITIC Construction Investment News, in the first half of 2022, eight of the 23 key property enterprises (excluding Jinmao service) achieved a total operating income of 32.95 billion yuan, an increase of 26.2 percent over the same period last year, and a net profit of 3.38 billion yuan, an increase of 14.9 percent over the same period last year. As a whole, the property enterprises with the background of central state-owned enterprises are optimistic about the valuation repair brought about by the recovery of real estate sales.

• The overall performance growth and profitability of the industry declined.

In the first half of 2022, the total operating income of 24 key property enterprises reached 84.84 billion yuan, an increase of 34.5 percent over the same period last year, which was 18.2 percent lower than that of the same period in 2021. The net profit from the same period of 2021 was 9.07 billion yuan, down 4.6 percent from the same period last year, and the growth rate was 70.2 percent lower than that of the same period in 2021. The homing net profit margin fell from 15.1 per cent in the first half of 2021 to 10.7 per cent in the first half of 2022, mainly due to a 2.6 percentage point decline in the consolidated gross margin from the same period last year to 24.7 per cent.

• In the tube area growth rate slowed down, outside the market into the head of the main source of the area of property enterprises.

In the first half of 2022, 22 key property enterprises achieved a total of 4.68 billion square meters under management, an increase of 12.3 percent over the end of 2021, and a slower growth rate than in previous years; except for two property enterprises that did not disclose the contract area, 20 property enterprises achieved a total contract area of 6.57 billion square meters, an increase of 11.3 percent over the same period last year; the slowdown in scale growth led to the original fault pattern still in place.

According to the data of the seven head companies we focus on tracking, with the exception of Country Garden Services Holdings and China Resources Mixc Lifestyle Services due to medium and large-scale mergers and acquisitions, the proportion of the other five outside the market is more than 50%. In recent years, head goods enterprises have been strengthening their own market expansion capacity building.

• The quality of revenue continued to decline, and monetary funds showed negative growth for the first time.

The proportion of accounts receivable in income of 23 key property enterprises continued to rise in the first half of 2022, from 44.4% in the first half of 2021 to 59.5% in the first half of 2022. The efficiency of capital recovery in property enterprises continued to decline, and the ratio of net operating cash flow / net profit of many companies decreased compared with the same period in 2021.

Affected by this, the overall monetary funds of the industry declined for the first time, with the total monetary funds of 23 key property enterprises reaching 78.25 billion yuan in the first half of 2022, down 8.5% from the same period last year.

• The differentiation among enterprises is obvious, and the overall situation of central state-owned enterprises is better than that of private enterprises.

In the first half of 2022, eight of the 23 key property enterprises (excluding Jinmao service) achieved a total operating income of 32.95 billion yuan, an increase of 26.2 percent over the same period last year, and a net profit of 3.38 billion yuan, an increase of 14.9 percent over the same period last year.

In the same period, the total operating income of 15 private property enterprises reached 50.8 billion yuan, an increase of 40.0 percent over the same period last year, which was 25.7 percent lower than that of the same period in 2021. The net profit of returning to the mother was 5.52 billion yuan, down 14.8 percent from the same period last year. The net profit margin dropped from 17.9 percent in the first half of 2021 to 10.9 percent in the first half of 2022, a decrease of 7.0 percent.

Not only in terms of performance, central state-owned enterprises are also significantly better than private enterprises in terms of ROE and the proportion of accounts receivable.

Investment advice:We are optimistic about the valuation repair of property enterprises with the background of central state-owned enterprises as real estate sales recover, and recommend A-shares:$China Merchants Property Operation & Service (001914.SZ)$Hong Kong stocks:$POLY PROPERTY DEVELOPMENT CO., LTD. (06049.HK)$、$China Overseas Property (02669.HK)$、$China Resources Mixc Lifestyle Services (01209.HK)$、$Binjiang Service Group (03316.HK)$、$YUEXIU SERVICES (06626.HK)$、$C&D PROPERTY (02156.HK)$等。

Risk Tips:The sales of the real estate industry continued to fall short of expectations; the intensification of external competition led to a decline in the gross profit margin of property management companies; and the integration after mergers and acquisitions was not as expected.