Event: Country Garden Services Holdings released the 2021 annual report, with operating income of 28.843 billion yuan, an increase of 84.9% over the same period last year, net profit of 4.033 billion yuan, up 50.2% over the same period last year, and core net profit of 4.607 billion yuan, an increase of 58.7% over the same period last year.

The goal of high performance increase has been successfully achieved, and cost control has been further optimized. In 2021, the company achieved operating income of 28.843 billion yuan, an increase of 84.9% over the same period last year, which was significantly faster than the annual growth rate of 61.7% in 2020. at the same time, it exceeded the five-year compound growth rate of 50% in early 2021, and the five-year target of 100 billion yuan got off to a smooth start. The net profit of return to the mother was 4.033 billion yuan, an increase of 50.2% over the same period last year, and the core net profit was 4.607 billion yuan, an increase of 58.7% over the same period last year. In 2021, the comprehensive gross profit margin is 30.7%, the year-on-year decline of 3.3pct, the home-owned net profit rate of 14%, the year-on-year decrease of 3.2pct, the core home-owned net profit rate of 16%, and the year-on-year decline of 2.6pct. The decline in profit margin is mainly due to: 1) the increase in the proportion of service income in cities with lower gross profit margin; 2) the reduction and retrogression of epidemic social security; 3) the investment in infrastructure and intelligent transformation equipment to pull down the gross profit margin. If you exclude the impact of urban services and new business segments, the comprehensive gross profit margin is 32.7%, down 1.4pct from the same period last year. The sales fee rate is 12.5%, down 0.9pct from the same period last year, while the expense rate during the period is 12.8%, which is 0.3pct lower than the same period last year. Cost control is further optimized.

The scale is growing at a high speed, and the strong city expansion capacity continues. In 2021, the basic property management income was 13.794 billion yuan, an increase of 60.3% over the same period last year, accounting for 47.8% of total revenue, 4.3pct to 30.3% of gross profit, and 9pct to 47.2% of gross profit. Including "three supply and one industry", the management area is 851 million square meters, an increase of 84% over the same period last year (the external management area of "three supply and one industry" is 766 million square meters, doubling with the same increase), and the contract area is 1.523 billion square meters, an increase of 68.2% over the same period last year. The joint management ratio is 1.79%, and the scale is growing rapidly. Among them, the proportion of third-party sources increased sharply to 54.8%. The new contract area of outward extension is 0.84 million square meters, an increase of about 15.9% over the same period last year, and the market-oriented extension continues to move forward. during the year, 134 new industry committee projects were added, an increase of about 2 times over the same period last year, and the winning rate of bidding projects was 50.4%, and the strong competitive bidding ability continued. The average unit price of basic material management in 2021 is 2.25 yuan / square meter / month, which is further higher than that of 2.15 yuan / square meter / month in 2020. The urban service income was 4.529 billion yuan, which increased by more than 4 times, and the proportion of total income increased to 15.7% compared with the same period last year. During the year, Xintuo Tianjin Binhai New area, Fujian Fuding sanitation integration and other projects, municipal services, space operation, industrial parks, schools, hospitals, the five core formats have a large scale, urban service continues to develop.

The related party finance has the safety cushion, and the business management business is progressing smoothly. Country Garden Holdings, the related party, had a net debt ratio of 45.4% in 2021, a decrease of 10.2pct over the same period last year, an asset-liability ratio excluding prepaid payments of 74%, a decrease of 6pct over the same period last year, a cash-to-short debt ratio of 2.29, an increase of 0.38 over the same period last year, and a temporary yellow position in the three red lines; the average financing cost decreased by 0.36pct to 5.29% compared with the same period last year It has successfully issued HK $3.9 billion convertible bonds this year, and has been approved by the Association of Inter-Bank Dealers with a quota of 5 billion yuan. The total principal of repurchase of priority notes has totaled US $45.7 million since 2021. (Country Garden Services Holdings and Country Garden Holdings are brothers with the same real controller, with high operational independence.) in terms of M & A, the company closed a new contract area of 445 million square meters in 2021 and completed the Blu-ray Garbo service in April 2021. Subsequently, they took stakes in Zhongliang property and Great Wall property by 6.24% and 15.28% respectively. Since the second half of 2021, we have successively completed the acquisition of Fuliang Global, Neighbourhood Lok and Zhongliang Baiyue Zhijia, with a total cost of about 16.4 billion yuan.

In 2021, it will achieve business operation service income of 654 million yuan, more than 100 commercial projects, with an area of more than 5 million square meters, covering shopping malls, commercial blocks, community commerce and professional markets, and more than 200 office buildings in charge of projects. in the management area of more than 2000 million square meters, since last year Country Garden Holdings business travel injection, the establishment of business writing business, business management business has continued to advance.

Community value-added services continue the trend of high growth, and the income and profit structure remains good. In 2021, the income of community value-added services was 3.327 billion yuan, an increase of 92.2% over the same period last year, continuing the high growth trend. The proportion of income increased to 11.5% compared with the same period last year. Due to the increase in the proportion of purchasing and selling business with lower gross profit margin and the intensification of media competition affected by the epidemic, the gross profit margin decreased by 4.6pct to 60.5% compared with the same period last year, which remained at a high level, while the gross profit ratio increased by 1.4pct to 22.7% compared with the same period last year. Of this total, the income from community media services was 978 million yuan, an increase of 179.1% over the same period last year, and the business grew rapidly after the acquisition of urban vertical and horizontal, while the income from local life services was 1.105 billion yuan, an increase of 107.1% over the same period last year. The income of non-owner value-added services was 2.675 billion yuan, an increase of 95.3% over the same period last year. The proportion of revenue and gross profit increased by 0.3pct to 9.3% and 0.5pct to 12.3% respectively, maintaining a good income and profit structure.

Investment suggestion: considering that the company needs to integrate a large number of M & A projects, the adjusted forecast is that the company's 2022-2024 return net profit is 61.60 billion yuan, with a year-on-year growth rate of + 52.7%, 40.2%, 36.5%, and the corresponding EPS is 1.83, 2.57, 3.50 yuan, respectively, and the current stock price corresponds to 15.62, 11.158.17 times of PE in 2022-2024, taking into account the phased adjustment of the real estate industry. Maintain the buy rating with a target price of HK $53.85.

Risk tip: the extension is not as expected, and the expansion of community value-added services is not as expected.