Key points of investment

Revenue and profit both increased, and gross margin was steadily high: the company's operating income was RMB 2.44 billion, up 60.7% year on year; net profit of RMB 340 million, up 88.8% year on year; net profit after excluding listing expenses and exchange profit and loss was $380 million, up 95% year on year; gross profit was $734 million, up 56.1% year on year; gross margin and net profit margin of Fumo were 30.1% and 13.8%, respectively, down 0.9 percentage points and 2 percentage points respectively; final payout of 17 HK cents per share, with a payout rate of 17 HK cents per share, a payout rate of 40%

The management scale has grown steadily, deepening high-energy urban areas: by the end of 2022, the company's contract area was 80.82 million square meters, an increase of 40.3% over the previous year; the company has 68 cities across the country, with 382 projects under management, with an area of 56.86 million square meters, an increase of 56.3% over the previous year. According to the energy level of cities, core Tier 1 and 2 cities accounted for 94%; by geographical area, East China, North China, Central China and other regions accounted for 63%, 13%, 10% and 14% respectively.

Outreach quality has been continuously optimized, and strategic alliances have been achieved through a multi-dimensional approach: In 2022, the company further improved the investment team's system construction. Through strategic alliance cooperation including equity cooperation, full committee cooperation, special services, etc., a third party expanded a contract area of 21.4 million square meters, 1.7 times the scale of expansion in 2021. Among them, second-tier cities and above accounted for more than 72% of the expansion, and the average unit price of the project reached 4.11 yuan/square meter/month.

Available capital is abundant and operating safety is high: by the end of 2022, the company's cash on hand was 1,019 million yuan, the compound annual growth rate of book cash in the past three years reached 94%, and the future available capital will be plentiful; the company's net operating cash flow in '22 was 315 million yuan, net profit was 341 million yuan, and the profit margin multiplier covered by adjusted net cash from operating activities was 0.92 times, effectively guaranteeing operational safety.

Our opinion: The company has a central enterprise background, has high operating security and sufficient capital, and its market expansion capabilities are constantly improving. Relying on the rich government and enterprise resources of related parties and their own specialized capabilities, the company is expected to build a strong competitive barrier in the field of urban operation and services, which will become a new growth point for the company's performance. We recommend paying attention.

Risk warning: Market expansion falls short of expectations; urban service business progress falls short of expectations; owners' satisfaction and collection rate falls short of expectations; value-added business expansion falls short of expectations.