Highly recommended. The target price remains at HK $1.24 per share. We communicated with the management of Zhongao Zhijia about the company's performance in 2019 and its forecast for the future. The company's performance in 2019 is basically in line with our expectations. We expect that the company's mergers and acquisitions in the past will continue to promote the steady growth of its future performance. China Austria's current valuation is only 3.3x2020 annual PE and 2.6x times 2021 PE, which is one of the listed property management companies with the lowest valuation. We maintain HK $1.24 per share, which is equivalent to 7.2x 2020 PE and 5.8x 2021 PE.
Mergers and acquisitions drive performance growth in 2019 and property management business slows down. In 2019, the income from Zhongao reached 1.52 billion yuan, up 48.5% from the same period last year; the net profit was 109 million yuan, up 13.0% from the same period last year; the growth mainly came from the acquisition and consolidation of five companies. The company's contract area increased by only 2.2% year-on-year to 7197.1 million square meters, of which the newly expanded area reached 6.157 million square meters, down 30.3% from 2018, and the exit area reached 8.627 million square meters, up 18.7% from 2018. In the absence of developers, the company needs more market-oriented measures to improve its market expansion ability.
The non-property management business is growing rapidly and the capital operation is frequent. In 2019, the company expanded its non-property management business through a series of mergers and acquisitions, involving real estate brokerage, landscape, cleaning and greening and other fields. On May 8, 2020, the company announced that it would acquire a 51% stake in Guangdong Huarui Environmental Engineering Co., Ltd. at a consideration of 40 million yuan to enrich its cleaning and greening business. The company also recently announced the sale of the previous acquisition of Guangdong Ming Jincheng, which we suspect may be related to the failure of the target company to meet expectations. It shows that the large-scale M & An also puts forward more challenges for the company to select the target and post-investment management.
The scale and mass are still there, and the value depression is obvious. Even if China Austria to Home faces various challenges in its future development, the company's 6540 million square meters of managed area is still in the middle level among listed property management companies. And the net cash on the company's account in 2019 was 330 million yuan, equivalent to 78.7% of the company's market capitalization of 420 million yuan.
Risk hint: the acquisition target can not meet the performance commitment to withdraw one after another, resulting in a large-scale non-renewal.