Maintain a strong recommendation and raise the target price to HK $2.50 per share. Based on the investment made by Greentown Service (hereinafter referred to as "Greentown") last night and recently, as well as the announcement of the establishment of a joint venture company, we communicated with China and Austria. We believe that the strategic cooperation with Greentown will directly increase the area under management of China and Austria, and then increase the income level of the company. According to the new forecast, our DCF model values the company at HK $2.50 per share, an increase of 101.6% over the previous target price, and our new valuation corresponds to 15.0 x 2020 PE and 11.3 x 2021 PE.
Greentown invested in China and Austria and set up a joint venture company. On June 29, 2020, China and Austria announced that they would set up a joint venture with Greentown Services, in which Greentown and China and Austria hold 70% and 30% respectively. The two sides further agreed that Greentown Services will give priority to recommending property management projects to China and Austria, and will appoint China and Austria to undertake its outsourcing business such as cleaning, security, maintenance and elevator maintenance, which is expected to directly increase the annual revenue of China and Austria by at least 300 million from July 2021. Prior to this, Greentown has subscribed for Sino-Austrian shares twice, and Greentown is expected to become the second largest shareholder in China and Austria after the subscription is completed, with a shareholding ratio of 18.67%.
The combination of strong and strong forces, complementary advantages. We believe that under this cooperation framework, the two sides will achieve win-win results: first, Greentown specializes in high-end property management, while China and Austria are good at the operation of middle and low-end properties, and the cooperation enables Greentown to maintain its high-end quality while taking into account the expansion of mid-and low-end stocks, while this move to China and Austria will directly enhance its market expansion ability. Second, China and Austria have a number of service companies, covering cleaning, security and other services, this cooperation will directly bring business to these companies.
Raise the operational and financial forecast for China Olympic Games in 2021 based on the original forecast. We predict that the cooperation will increase the net managed area of China and Austria by 9 million square meters in 2021, the income will increase by 7.7% to 2.153 billion yuan, and the net profit will increase by 8.1% to 170 million yuan. In addition, Greentown's strong brand advantage will enhance the long-term growth rate from China and Austria to home.
Risk hint: the establishment of the joint venture company did not go well; failed to sign a cooperation agreement with Greentown as scheduled.