Event: the company released 2022 operating data, Waituo performance leading industry on January 1, 2023, Yashi Group official account released 2022 operating data inventory, market expansion, the company won the "third-party market extension area TOP1" for 8 consecutive months; in terms of value-added services, the "elegant Life Happy" Mall has more than 22000 registered members and completed orders of more than 50,000 orders. In terms of urban services, there were nearly 40 bid renewal / winning projects in 2022, with a total contract value of more than 1.035 billion and an annual contract value of 380 million.
Comments: extension has excellent performance, large room for the growth of value-added services, and the impact of real estate related business is gradually alleviated. 1) Outstanding performance and strong independent development ability. The scale of the company is in the first echelon of the industry, with an area of 530 million square meters under management as of June 30, 2022, and a new third-party contract area of 210 million square meters in 2020 and 130 million square meters in 2021, maintaining a rapid expansion rate. According to the mid-2022 report, the company's third party accounted for 83.4% of the total area, far higher than the industry average of 57.9% (Everbright focuses on covering the caliber of property companies), and basically achieved independent development.
2) actively develop value-added services for owners, and there is more room for business growth. The value-added of the owners of the company has formed four parts: life and integrated services, residential resource services, home decoration services and non-residential value-added services. 2022H1 non-residential value-added services account for 16.5% of the sector income, while the company accounts for 56.7% of the managed area. With the company's excavation of public construction and commercial enterprise customer demand, non-residential value-added services have more room for growth.
3) the rapid development of urban services. On January 11, 2023, Ya Life Service won the bid for urban and rural sanitation integrated operation service project in Fangshan County, Lvliang City, Shanxi Province, with a contract term of 8 years, with a total contract amount of 157 million yuan, which is the company's first urban service project in 2023. The company's Huifeng Qingxuan Environmental Science and Technology Group has been engaged in sanitation for nearly 20 years and has professional urban service experience. with the further marketization of urban and rural sanitation business, the follow-up company's urban service sector is expected to maintain a rapid development trend.
4) the impact of real estate related business is gradually alleviated. Affected by the real estate development environment, 2022H1's epitaxial value-added service revenue decreased by 24% compared with the same period last year, accounting for 13% of the total revenue, which was significantly lower than that of 2021. Following the development of the company's focus management basic set and owner value-added business, the proportion of real estate development-related business may be further reduced, and the impact of the real estate development industry on the company's performance is limited.
Profit forecast, valuation and rating: the scale of the company is in the first echelon of the industry, the extension has excellent performance and strong independent development ability, but due to the continuous adjustment of the real estate industry, it has a certain impact on the company's performance. The developer's income from value-added services decreased. In the first half of 2022, out of the principle of prudence, the company recorded an impairment loss of 270 million yuan in accounts receivable. At present, the industry is still bottoming out, and the recovery of real estate-related business still needs further observation. We have lowered the growth forecast of the company's extended value-added services and lowered the company's net return profit in 2022-2024 to 2.02 billion yuan (down 18%) / 2.41 billion yuan (down 19%) / 2.8 billion yuan (down 14%), corresponding to 1.42T 1.69max 1.97 yuan respectively. The current stock price corresponds to the PE of 5.7x / 4.8x / 4.1x in 2022-2024. the valuation is attractive and the "overweight" rating is maintained.
Risk hint: the development of epitaxial value-added services is not as expected, and the competition of third-party extension intensifies or affects the speed of expansion.