Event: Ya Life Service's revenue in 2022 was +9%, Guimu's net profit -20%, and Guimu's net profit was announced for 2022. It achieved revenue of 15.38 billion yuan during the year, up 9.2% year on year, gross profit of 3.38 billion yuan, down 12.5% year on year, gross profit margin 22%, down 5.5 pct year on year; Guimu's net profit was 1.84 billion yuan, down 20.3% year on year, EPS was 1.3 yuan, down 22.2% year on year.
Comment: The core business is developing steadily, third parties are expanding leading industries, and the scale of accounts receivable is accumulating rapidly 1) Core business is developing steadily, and real estate-related business is dragging down performance. In 2022, the company's property management/owners' value-added /urban service revenue was 10 billion/2.3 billion/1.3 billion yuan respectively, up 15.8%/24.3%/88.3% over the previous year, and the total revenue of the three major businesses accounted for 89%, up 9pct from the previous year; gross profit accounted for 88%, a sharp increase of 17pct. Under the challenges of the external business environment, the company's core business developed steadily and had strong development resilience; external value-added services were affected due to the downturn in real estate, and the decline in revenue and profit increased in the second half of the year. The gross margin increased from 39.2% in 2021 The decline to 24.4% (22H1 gross profit of 360 million yuan, 4.2 billion yuan for the whole year, compared to 1.12 billion yuan last year) was the main reason for the decline in performance. Subsequent companies focused on basic property management and value-added business development for owners, and the proportion of real estate development-related business may decline further, and the impact on performance is limited.
2) Strong outreach strength and continued to lead the industry. By the end of 2022, the company had a management area of 546 million square meters, which was in the first tier of the industry scale. Judging from the project layout, 33.8% were located in the Yangtze River Delta urban agglomeration and 19.6% were located in the Guangdong-Hong Kong-Macao Greater Bay Area. Under the nationalized layout, the project quality was guaranteed; from a source perspective, third parties accounted for 83% of the area under management. Most of the projects were developed by third parties, with the ability to develop independently; the contract area expanded by new third parties in 2022 was 60.6 million square meters, which is the main driving force supporting the company to achieve steady endogenous growth .
3) Project repayment has been delayed, and impairment provisions have increased at the same time. In 2022, due to the impact of the epidemic and macroeconomics, customer repayments were delayed. The company's accounts receivable accumulated rapidly. Total trade receivables were about 6.9 billion yuan, an increase of about 3 billion yuan over the previous year; other receivables were 3.9 billion yuan, an increase of 2.5 billion yuan. The company increased its impairment provision ratio accordingly. In 2022, the impairment loss of accounts receivable was 4.7 billion yuan, an increase of 191% over the previous year. In 2023, as the impact of the epidemic was lifted and economic activity gradually recovered, the company managed projects more finely, improved the repayment mechanism, and the cash flow situation is expected to improve.
Profit forecasting, valuation and ratings: The company's size is in the first tier of the industry, the expansion performance is excellent, the ability to develop independently is strong, and the real estate industry continues to adjust, which has an impact on the value-added services of the company's developers. We lowered the growth expectations for the company's extended value-added services, while increasing the forecast for the impairment provision ratio of receivables. The company's net profit for 2023-2025 is 2.18 billion yuan (down 9%) /2.49 billion yuan (down 11%) /2.71 billion yuan (new). The corresponding EPS is 153/1.76/1.91 yuan, current stock price, respectively. The corresponding PE for 2023-2025 is 3.9 times/3.4 times/3.2 times. The valuation is highly attractive, but accounts receivable and related parties' business require further observation to maintain the “increase in holdings” rating.
Risk warning: The development of extended value-added services fell short of expectations, and project payback fell short of expectations.