The return profit increased by 31.4% to 119 million yuan: by the middle of 2020, the company achieved operating income of 741 million yuan, an increase of 32.7% over the same period last year, of which property management service income increased by 56.2% to 365 million, pre-delivery and owner consultancy service income increased to 12.5% to 244 million yuan, and community value-added service income increased by 5% to 60 million. Smart solution services increased by 41.6% to 73 million yuan. The gross profit of the company is about 250 million yuan, and the gross profit margin remains relatively stable, of which the gross profit margin of property management has dropped slightly to 31%, while that of other express businesses has increased (specifically: pre-delivery gross profit margin of about 34.2%, community value-added gross profit margin of 50%, smart solution gross profit margin of 33%). The company recorded a return profit of 119 million yuan, an increase of 31.4% over the same period last year, and an adjusted profit (excluding share payment compensation) of about 136 million yuan, an increase of 48.8% over the same period last year, in line with market expectations.

Property management business continues to grow at a high level, and mergers and acquisitions in the second half of the year are expected to make efforts: by the middle of 2020, the company has realized property management service income of about 365 million yuan, an increase of 56.2% over the same period last year, accounting for 49.2% of the total revenue. The gross profit is about 114 million yuan, an increase of 42.7% over the same period last year, and the company's property management business has achieved sustained high growth. At present, the company's property management services have covered 44 cities in 15 provinces, municipalities and autonomous regions in China, with a total construction area of 48.8 million square meters and a contract construction area of 59.2 million square meters. The total number of properties under management is 323. In addition, the company was affected by the epidemic in the first half of the year, and the progress of mergers and acquisitions slowed down. In the first half of the year, the company only accepted Langtong properties in Ningbo, Zhejiang (consideration 27 million-4 million square meters under management). Considering that the company expects mergers and acquisitions to reach 1000-1500 million square meters for the whole year, it is expected that mergers and acquisitions will be completed gradually in the second half of the year.

Community value-added services are expected to gradually improve in the future: by the middle of 2020, the company's community value-added services will only grow by 5% to 59 million yuan, accounting for 8% of the total income, gross profit of about 29 million yuan, an increase of 20% over the same period last year, and a gross profit margin of 49.8%, an increase of 6.2% over the same period last year. The growth of the company's community value-added services is limited. It is mainly due to the fact that Qijia Technology, a community value-added service, achieved a report in February (about 26 million income in 2019), resulting in a slowdown in the growth of the company's community value-added services, but excluding Qijia technology, other business sectors of community value-added services expanded smoothly in the first half of the year, of which 50% of the income came from space leasing, community rental and sale, community finance and other businesses, achieving 64.6% growth. 40% of the revenue comes from the parking business, and the revenue also maintains steady growth. It is expected that in the second half of the year, the company's community finance, community education and other business sectors will also gradually develop, driving the company's community value-added services sector to continue to grow.

The target price is HK $44.3 to maintain the buy rating: we believe that the company is a property management company with a relatively undervalued valuation in the property management sector, but the development potential is not weak, taking into account the company's outstanding ability to expand outside the market and the gradual increase in sales of the parent company. support for both residential and commercial property projects will be gradually strengthened.

We estimate that from 2020 to 2022, the company will achieve a return profit of 230 million, 342 million, 500 million, an increase of 38pr 51% par 46% compared with the same period last year. Excluding the impact of option fees, the company's adjusted net profit for 2020-2022 is about 260 million, 370 million, 530 million, with a compound growth of about 45%. We give a price-to-earnings ratio of 20 times 2021 and maintain a buy rating for the target price of about HK $44.30.