The income of Olympic Garden Health in the first half of the year rose 39.5% from the same period last year to about 550 million yuan. In terms of segment revenue, the revenue of the property management services segment rose 43.4 percent to 410 million yuan compared with the same period last year, while that of the commercial operation services segment rose 28.9 percent to 140 million yuan. The overall gross profit margin remained stable, and the core net profit increased by 28.8% to 105 million yuan compared with the same period last year. With the merger of Le Life in August and the gradual recovery of delivery by the parent company, the Orchard Group, the company reiterated its goal of reaching 4500 million square meters by the end of the year and supported revenue growth in the second half of the year and even next year. As of the end of June, the parent company Aoyuan Group has about 4900 million square meters of land storage (including outstanding sales) and 3000 million square meters of planned area from urban renewal projects, which will support the medium-and long-term growth of Olympic Park Health. We maintain our "buy" rating and maintain our target price of HK $11.50 per share.

Summary of the report

Revenue rose 39.5% year-on-year. The income of Olympic Garden Health in the first half of the year rose 39.5% from the same period last year to about 550 million yuan. In terms of segment revenue, the income of the property management services segment increased by 43.4% year-on-year to 410 million yuan, of which the income of the basic property management services, community value-added services and sales support services sub-segment increased by 30.4%, 96.9% and 36.5%, respectively, to 230 million yuan, 60 million yuan and 110 million yuan. Revenue from the business operation services segment rose 28.9% year-on-year to 140 million yuan, of which revenue from the business operation and management services and market positioning and merchant solicitation services subsectors rose 44.5% and-12.1%, respectively, to 110 million yuan and 25 million yuan, respectively. The increase in revenue was mainly driven by the increase in the size of management, with the area of management rising 34 per cent year on year to about 1600 square meters, and the number of shopping malls under management increased from 12 at the end of June last year to 17 at the end of June 2020.

The overall gross profit margin remained stable. The gross profit margin rose slightly by 0.6 percentage points compared with the same period last year, of which the property management services division increased by 2.5 percentage points compared with the same period last year, mainly driven by the increase in the proportion of income from community value-added services and big owners' value-added services, whose gross profit margin was higher than that of basic property management services. The ratio of administrative expenses to income dropped sharply by 5.5 percentage points. After deducting the one-off listing fees of last year, the ratio of administrative expenses dropped 1.4 percentage points compared with the same period last year. Corporate tax planning was mainly carried out in the second half of the year, resulting in an increase in the effective tax rate from 22 per cent in the first half of last year to 30 per cent in 2020. Taking into account the factors, the health net profit of the Olympic Garden rose 23.5% to 110 million yuan compared with the same period last year, and the net interest rate decreased 2.6% to 20.3% compared with the same period last year.

Maintain a "buy" rating. Overall, Olympian Health's first-half results were roughly in line with expectations, with core net profit up 28.8 per cent in the first half of 2020 compared with the same period last year, excluding one-time gains and expenses. The company's newly acquired Le Life consolidated in August to support revenue growth in the second half of the year, and new projects delivered in the second half of the year can support revenue growth in 2021.

In the medium to long term, the parent company Aoyuan Group has about 4900 million square meters of land storage (including outstanding sales) and 3000 million square meters of planned area from urban renewal projects as of the end of June, which will support the growth of the health management scale of the Olympic Park. We maintain our "buy" rating and maintain our target price of HK $11.50 per share.

Risk hint: the competition in the outbound market of M & An is becoming more and more fierce; the uncertainty of the development of value-added services