The annual results were in line with expectations, and the dividend rate increased to 40%: the company's revenue in 2022 was 2,172 billion yuan, down 6.6% from the previous year. As the epidemic in the first half of the year affected the operation of some cities, the company quickly made up in the second half of the year. Revenue in the second half of the year reached 1,265 million yuan, reaching a new high of revenue in the first half of the year; Guimu's net profit was 659 million yuan, down 8.5% from the previous year. The final payout was HK7.58 cents per share, and the total interim dividend payout reached HK13.22 cents per share, increasing the payout ratio to 40%. The company plans to increase its dividend payout efforts, increase the payout rate to 60% in the next 2-3 years, and increase returns to shareholders.
The revenue structure remained stable: as of 2022 low, cemetery services, funeral services, and ancillary services accounted for 80.5%, 16.6%, and 2.9% of the company's segment revenue, respectively. Looking at the subregion, the company's main regions, Shanghai, Anhui and Liaoning, had revenue of 965, 193 and 152 million yuan respectively, accounting for 45.8%, 9.2% and 7.2% respectively, all of which were affected by the epidemic and decreased year-on-year. Some regions bucked the trend. For example, the revenue of the Shandong region reached 127 million yuan, an increase of 28.9% over the previous year.
Maintain high profitability: employee costs, engineering costs, material and material consumption, and marketing expenses accounted for 21.3%, 5.7%, 7.5%, and 2.0% of revenue in 2022, respectively, reaching a total of 36.5%, down 0.4 percentage points from the same period last year. With the rapid recovery of business in the second half of the year, profitability remained high throughout the year. Operating profit margins and net interest rates were 47.4% and 30.3% respectively, up 0.3 and 0.7 percentage points respectively from the same period last year.
Adequate reserves ensure continued growth: by the end of 2022, the company operated a total of 31 cemeteries and 30 funeral service facilities. The total remaining saleable area reached 2.62 million square meters, and the land area for use in 2021/2022 was 4.45 and 32,800 square meters, respectively. The company's reserves are sufficient to ensure the company's continued growth. In the future, the company will continue to expand its regional layout and obtain more projects through cooperation, mergers and acquisitions, etc.
The company holds about 2.4 billion yuan in cash. An abundance of cash is a guarantee that the company's business will continue to expand.
Maintaining the “increase in holdings” rating, target price of HK$7.80: The company's business quickly recovered in the second half of 2022, and the full-year performance was in line with expectations. The annual dividend rate has increased to 40%, and the payout rate is expected to rise to 60% in the next 2-3 years, increasing returns to shareholders. We expect the company's net profit attributable to shareholders of listed companies in 2023/2024 to be 880 million yuan and 1.02 billion yuan respectively, up 33.8% and 15.7% year-on-year respectively.
We maintain the company's “increase in holdings” rating with a target price of HK$7.8, equivalent to 18/15 times PE in 2023/2024.
Risk warning: industry regulatory risks; industry competition is fierce; acquisitions do not meet expectations; integration of new acquisition projects falls short of expectations.