Brief performance review
On March 24, 2023, the company announced its 2022 results: achieved revenue of 3.148 billion yuan in 2022, -12.5% year on year; achieved net profit of 562 million yuan to the mother, -9.2% year on year.
Management analysis
The performance fell short of expectations. The company's revenue in 2022 was 15% lower than our expectations, mainly because: 1) some business development scenarios affected by the pandemic were limited, and community value-added service revenue fell below our previous expectations by 16%; 2) the real estate industry continued to decline, and non-owners' value-added service revenue shrank more than expected; 3) Life services and commercial asset management and consulting services revenue fell sharply due to the impact of the pandemic and business adjustments.
Focusing on basic property management, the scale of management is growing steadily, and the share of third parties continues to increase. Basic property management has the anti-cyclical attribute of “inventory+incremental”, and other businesses are easily affected by economic fluctuations. In 2022, the company focused on the basic property management market and achieved revenue of 2.88 billion yuan from basic property management services, accounting for 54.6% of total revenue. This is another return to more than 50% after 2019. By the end of 2022, the company had a management area of 160 million square meters, an increase of 15% over the previous year, of which third parties accounted for 56.3%, an increase of 2.5 percentage points over 2021; the contract area was 270 million square meters, an increase of 14.6% over the previous year.
There is plenty of cash on the books, and a steady and continuous dividend payment. By the end of 2022, the company's cash and equivalents were $2.05 billion. Although it was down 9.5% year over year, it was still plentiful. The company paid a dividend of HK$0.191 per share for the end of 2022, plus HK$0.211 per share in mid-2022. The total dividend per share for the whole year reached HK$0.402. The dividend ratio corresponding to the current stock price was 14.3%.
Profit Forecasts, Valuations, and Ratings
Considering the contraction of some businesses, we lowered our forecasts for 2023 and 2024 to 680 million yuan and 780 million yuan, down 13.4% and 13.6% respectively from the previous forecast; at the same time, introducing the 2025 forecast, the estimated net profit of the mother in 2025 was 880 million yuan, +13.1% year on year.
We maintain our “buy” rating considering the company's strong expansion capabilities and the fact that the scale is expected to continue to increase. The current price of the company's stock corresponds to the 2023-25 PE valuation of 4.8x, 4.2x, and 3.7x.
Risk warning
The impairment of accounts receivable exceeded expectations; expansion fell short of expectations; value-added services were not well developed.