Revenue is growing steadily. In 2022, the company achieved revenue of 3527.40 million yuan, an increase of 1.7% over the previous year.
In 2022, the profit attributable to the company's shareholders was 403.49 million yuan, a year-on-year decrease of 20.9%. The full-year dividend was HK20.69 cents per cash share, a year-on-year decrease of 42.5%.
The area under management has contributed to a steady increase in property management revenue. In 2022, revenue from basic property management services was $2814.79 million, accounting for 79.8% of revenue, an increase of 7.0% over the previous year. By the end of 2022, the company's contract area was about 70 million square meters, an increase of about 23% over the previous year, and the number of contract projects was 661. By the end of 2022, the company's managed area reached about 53.8 million square meters, an increase of about 30% over the previous year, and the number of projects under management was 587. Among them, commercial properties accounted for 45.5%, public and industrial properties accounted for 19.0%, and residential properties accounted for 35.5%. The increase in the area under management is mainly due to: (i) the company continued to take over commercial and residential projects developed by Excellence Real Estate Group, adding 2.11 million square meters of managed area in 2022; and (ii) the third party's expansion contribution increased by 10.45 million square meters. At the end of 2022, the area of projects under management was divided by region. Of these, 43.5% were located in the Guangdong-Hong Kong-Macao Greater Bay Area, 19.7% were located in the Yangtze River Delta urban agglomeration, and 36.8% were distributed in other regions. Commercial property revenue increased 10.5% year over year in 2022. Among them, commercial property revenue from third-party market expansion increased 13.5% year-on-year. Public property revenue fell 39.5% year over year in 2022; residential property revenue increased 36.7% year over the same period.
The downturn in the real estate economy and the pandemic affected value-added services and other business performance. In 2022, revenue from value-added services was about 668.71 million yuan, down 14.3% year on year, accounting for 19.0% of revenue. The decline in revenue from value-added services was mainly due to the downturn in the real estate economic environment. The service revenue from the caseload and first-hand housing brokerage business decreased by RMB 136.43 million compared to the same period in 2021. In 2022, revenue from other businesses was 43.89 million yuan, accounting for 1.2% of revenue, a year-on-year decrease of 21.3%.
The company's gross margin has declined, with the gross margin of value-added services falling. Gross margin fell 3.8 percentage points year-on-year from 27.7% in 2021 to 23.9% in 2022. The gross margin of basic property management services was 21.1%, down 1.8 percentage points from 2021, mainly because (i) due to the phased impact of the epidemic, the gross profit margin for PM commercial projects decreased in parking lots and central air conditioning projects, which was basically eliminated in 2023; and (ii) the share of third-party property services increased, and the marketed gross margin was objectively lower than that of Excellent Commercial Enterprise Services' own high-end commercial projects. The gross margin for value-added services was 33.1%, down 8.4 percentage points from 2021. Mainly due to the downturn in the real estate economic environment, the gross profit margin of the caseload and first-hand housing brokerage business declined. The gross margin of other businesses was 68.0%, up 7.3 percentage points from 2021.
Investment advice: Maintain a “better than the market” rating. We expect the company's EPS for 2023-2024 to be 0.37 yuan and 0.43 yuan respectively. We gave the company a target valuation of 8-10XPE for 2023, with a reasonable value range of 2.96 to 3.70 yuan (3.38 to 4.22 Hong Kong dollars), giving the company a “superior market” rating. Risk warning. Management scale expansion fell short of expectations, major customer strategies fell short of expectations, and labor costs rose. The exchange rate is HKD1 = RMB 0.8758.
Risk warning: Management scale expansion falls short of expectations, major customer strategies fall short of expectations, and labor costs rise.