Core viewpoints
Tenants in the company's asset operation mode are vulnerable to the adverse effects of the epidemic and economic fluctuations, and their performance is under pressure in 2022. The recovery of consumption and economic recovery in 2023 is expected to be gradually realized, which is positive for the rental rate and performance of the company's projects.
Event
According to the annual report, the company achieved operating income of 880 million yuan in 2022, a decrease of 3.0% over the same period last year, and a net profit of 97.037 million yuan, down 21.8% from the same period last year.
Brief comment
Full-year results are under pressure. The company reduced rents to tenants affected by the epidemic in the third and fourth quarters of 2022, and some tenants withdrew their rents, resulting in a year-on-year decline in revenue of 30.9% and 24.1% in the third and fourth quarters of 2022. The pressure on revenue in the second half of the year led to a 3.0% year-on-year decline in full-year revenue. The main reasons for the decline in net profit are as follows: (1) the progress of individual joint venture projects is slower than expected, and the annual investment income is-13.18 million yuan, compared with 1.61 million yuan in 2021; (2) the income is downward but the cost is rigid. Sales and management costs have increased in varying degrees; 3, the completion of a number of mergers and acquisitions and the development of new projects throughout the year, resulting in an increase of about 17 million yuan in financial expenses compared with 2021.
During the year, Xintuo had four light asset management projects. In 2022, the company steadily promoted the project expansion, with four high-quality projects in Shanghai and Beijing, all of which are located in two first-tier cities, including the property management project of Shanghai tomorrow Square, the entrusted management project of Shanghai Renda Business Building, the entrusted management project of Jinhe Longfu Temple in Beijing, and the property management project of Shanghai Changning Financial Park. By the end of the year, the total number of operating projects was 73, and the total operating service area was 1.31 million square meters, a net increase of 3 and 190000 square meters respectively over the previous year.
The optimization of shareholder structure will benefit the economic recovery in 2023. The company's small non-shareholders Wuxi Huaying, Suzhou Huaying and Changshu Huaying have been reduced in 2022, new institutional shareholders include Huaxia Fund, PICC assets, Ping an Capital Management, and the investor structure has been further optimized. While large non-shareholders lifted the ban in April, its reduction must also meet that the reduction price is not lower than the adjusted issue price of 7.09 yuan, and there is no possibility of reduction under the current stock price. With the optimization of epidemic prevention and control policies, consumption has significantly picked up, the economy has gradually improved, and the project tenants operated by the company have a high degree of connection with consumption and economy, and the company's rental rate is expected to improve this year, promoting further growth in income performance.
Keep the target price and buy rating unchanged. We downgrade the company's profit forecast, and the EPS for 2023-2025 is 0.260.330.40 yuan respectively (the original forecast is 0.360.43 yuan for 2023-2024). Given the recovery in consumption and the economy, corporate project rental rates are expected to bottom out and business expectations are expected to boost valuations. We keep our target price at 7.54 yuan and our buy rating unchanged.
Risk analysis.
The main risks that a company may face are as follows:
1. The epidemic situation may be repeated, affecting the normal operation of the company. At present, the first peak of the COVID-19 epidemic in China has passed, and it cannot be ruled out that there may be a new peak of infection, which will adversely affect consumption and the economy and interfere with the normal operation of the company.
2. The progress of the new expansion project may not be as expected. The company's new expansion project may face some uncertainties, resulting in lower-than-expected progress of construction projects and investment promotion, which will be a drag on the company's performance.
3. The speed of project expansion may not be as fast as expected and the risk of contract expiration. The company has different contacts with new projects, and the speed of new development depends on close consultation between the two sides.
Some of the company's projects are about to expire, and there is uncertainty about renewal.