Key points of investment

Revenue and profit grew steadily, cash was plentiful, and dividends were maintained: the company achieved revenue of 1,983 million yuan in 202A, an increase of 41.7% over the previous year; consolidated gross margin was 29.9%, down 2.2 percentage points from the previous year; achieved net profit of 419 million, an increase of 28.9% over the previous year; and achieved net profit of 412 million yuan, an increase of 28.0% over the previous year. As of the end of 2022, the company's cash and cash equivalents amounted to $1.95 billion. Considering that the company has plenty of cash on hand, the company maintained a high dividend rate. The full year of 2022 paid out HK$1.001 per share, with a payout rate of 60.0%.

5S value-added service revenue grew rapidly: In 202A, the company's 5S value-added service revenue reached 249 million yuan, an increase of 79.3% over the previous year. Among them, the Binjiang Youju business achieved revenue of 120 million yuan, an increase of 1811.9% over the previous year. Since the rapid growth of Binjiang Youju's business mainly came from the hardware business with slightly lower gross margin, the gross margin of 5S value-added services fell 23 percentage points to 48.3%. We believe that the rapid development of the company's 5S value-added business is due to the owners' recognition of the “Binjiang” brand and service quality. With the maturity and promotion of the product system, 5S value-added services are expected to become the company's new profit growth point.

The scale has grown steadily, and strategic partners have been expanded: in 2022, the company first entered Shenzhen and Haining. Currently, it covers 18 cities across the country, adding strategic partners such as Haining Wancheng Group and Jinhua Xianhua Investment. By the end of 2022, the company's managed area and contract area reached 42.0 and 69.1 million square meters, respectively, up 40.1% and 38.7% year-on-year respectively; the additional contract area was 19.3 million square meters, of which third parties accounted for 59.1%.

Relevant industry positions have increased, and collaboration has consolidated brand advantages: Binjiang Group's 202A cumulative sales amount ranked 13th in Cr Rui's ranking, an increase of 9 places over the previous year, and the amount of equity land acquisition ranked 7th in the China Index. Affiliates are expected to bring more high-end residential projects to the company, further optimize the company's project structure, and consolidate the brand influence of the company's high-quality service benchmark.

Our view: The company collaborates with Binjiang Group to jointly set a benchmark for quality service and has high brand recognition.

In 2022, the company's management scale grew steadily, market expansion capabilities continued to improve, and 5S value-added services made a breakthrough. We believe that with the gradual maturity of 5S value-added service products, 5S value-added services are expected to become a new profit growth point for the company. We recommend paying attention.

Risk warning: Business expansion falls short of expectations, 5S value-added business development falls short of expectations, and customer satisfaction and take-over rates have declined.