This report is read as follows:
2023H1 performance is in line with expectations, digital enabling traditional business is expected to improve operational efficiency.
Summary:
Investment suggestion: the performance is in line with expectations, and the 2023H1 performance has a high year-on-year growth. It is estimated that the company's return net profit in 2023-2025 is 8.85,10.40,1.181 billion yuan respectively, and the EPS is 0.38,0.45,0.51 yuan respectively. 2024 15xPE is granted, maintaining the target price of HK $7.66 and maintaining the overweight rating.
Performance summary: 2023H1's revenue was 1.524 billion yuan (RMB, the same below), + 68.2% compared with the same period last year; operating profit was 845 million yuan, + 106.5%; operating profit margin was 55.4%, + 10.3 pct; and net profit was 465 million yuan, + 78.0% year-on-year. Among them, the revenue of cemetery service was 1.287 billion yuan, + 76.9% compared with the same period last year, and that of funeral service was 224 million yuan, + 36.2% of the same period last year. The operating profit margins of cemetery services and funeral services have increased significantly compared with the same period last year and month-on-month. The interim dividend for 2023H1 is HK9.06 cents per share.
Benefit from the recovery of the consumption scene, the performance is in line with expectations. Since 2023, the economy and society have returned to normal operation, the offline consumption scene has resumed, and the revenue of the company's cemetery service and funeral service has achieved high growth compared with the same period last year. At the same time, the operation recovery of the mature cemetery optimizes the business structure, improves the superimposed operation efficiency, and improves the company's operating profit margin obviously. Continuing the development strategy of endogenesis and extension, the company acquired 100% equity in Yan'an Hongfu, a funeral integration project, with a consideration of 41 million yuan in the first half of 2023, and signed a funeral service project in Hunnan District, Shenyang City, Liaoning Province. improve the layout of the funeral industry chain in the northeast. From a regional point of view, the Shanghai area has recovered well, with an increase in the proportion of revenue. 2023H1 Shanghai accounted for 48.6% of revenue, an increase of 123% over the same period last year.
Focus on digital transformation and empower traditional business. In 2023, the company will actively promote digital transformation, including the completion of the VR environment system of Shanghai Fushou Park, the landing of digital human technology, and so on. Embed digital technology into the traditional business and launch the "Huixin Valley of the Digital Mausoleum" project, marking the official entry of Fushou Garden into the field of digital life services; innovative research and development of 3JI innovative iterative products with the integration of "marking, commemorating and recording", committed to the continuous extension and expansion of product content. The company strives to build the intelligent value creation ability and comprehensive utilization ability of resources in the life service ecosystem, and the online and offline service system is more in-depth.
Risk tips: funeral industry policy risk; macroeconomic cycle downside risk; plan implementation is not as expected risk.