In the middle of 16 years, the income increased by 32.6%, the core net profit increased by 21.9%, and the management scale continued to expand.
In the first half of 2016, the group achieved operating income of 261.4 million yuan, up 32.6% from the same period last year, and gross profit of 76.0 million yuan, an increase of 9.8% over the same period last year. The net loss attributed to the parent company is 6.0m yuan. Considering that the company's O2O business is still in the promotion stage, the core net profit excluding its impact and the company's option fees in the first half of 2016 is 38.2 million yuan, an increase of 21.9% over the same period last year, and the adjusted EPS is 0.0478 yuan. The construction area managed by the group continues to expand. In the first half of 2016, the total number of properties under contract management was 185, covering 28 cities in 11 provinces across the country. The total contract management floor area has reached 36.5 million square meters, an increase of 8.0% over the end of 2015. The Love to Home APP has covered 4600 residential communities, with about 465000 registered users, about 30 per cent of monthly active users and 6 per cent of daily active users. The number of merchants settled in reached 2808, and 434200 orders were received and processed in the first half of 2016.
The group's traditional property management business is sound, and the gross profit margin and adjusted net profit rate are relatively stable.
The group's sales and service costs increased by 31.8% over the same period last year to 168.6 million yuan. Due to the increase in the area and quantity of property under management, the increase in the cost of sales services is due to the increase in subcontracting costs and labor costs caused by the increase in management area. The sharp decline in the company's net profit and net interest rate in accordance with Hong Kong accounting standards is due to option fees and a net loss on the O2O platform. After excluding the above two items, the net interest rate is 14.6%, which is basically stable.
The calculated income area increased significantly in the second half of the year, and the O2O business will continue to be invested.
The group announced on July 26 that it had signed an agreement with ten shareholders of Zhejiang Yongcheng to acquire 70% of its shares at a price of 210 million yuan. Zhejiang Yongcheng manages 234 property projects with a total contracted management floor area of 18 million square meters. The group will hold a special general meeting on September 15 to vote. If the transaction is finally completed, the company's area under management will increase by about 49.3%, while the calculated income area will increase by about 100%, which will have a great impact on the company's 17-year performance. The goal of the Group's O2O business in the second half of the year is to continue to expand its coverage, increase customer unit prices, increase gross margins and seek a sustainable business model. Based on the existing experience and technology, the company's O2O team has established a cloud platform for community service O2O to provide one-stop community service solutions for third-party property companies. This technology has greatly reduced the cost of Internet technology development for third-party property companies to carry out community O2O business, and revenue is expected to be realized in the second half of the year. In terms of cost, as of mid-16 years, O2O business has invested 387 million yuan, and plans to invest about 12-15 million yuan in the second half of the year.
Investment advice: if Zhejiang Yongcheng's acquisition is completed on schedule, the group's realized income management area in the second half of the year will double, while endogenous growth will remain robust. O2O business is open to third-party property companies and expands rapidly. Love to home platform has entered the stage of groping for profit, and the loss is expected to be controlled in the next two years. The growth of management area and the maturity of O2O business will release the company's performance in the next two years. We adjusted the diluted EPS for 16,17 and 18 to RMB0.06,0.09 and RMB0.16. Considering the valuation level of companies in the same industry, we believe that the fair value of the company is HK $1.29, which is 20 times that of 2016, and the buy rating is maintained.
Risk tips: property management service complaint rate increases, property management service fee collection rate decreases, the progress of community life service platform is lower than expected, complex interests in the community affect the promotion of O2O platform, online and offline disconnection occurs in the process of platform construction.