销售回补，上海区域占比提升：截止2023 年中期，公司的分部收入中墓园服务、殡仪服务和配套服务分别为12.87、2.24 和0.13 亿元，占比分别为84.4%、14.7%和0.9%。分区域来看，公司的几个主要区域上海、辽宁和安徽的收入分别为7.34、1.12 和1.02 亿元，分别同比增长123%、52%和12%，占比分别达到48.6%、7.5%和6.8%。Key points of investment
Business recovered rapidly in the first half of 2023, and revenue and profit increased dramatically: the company's revenue for the first half of 2023 was 1,525 million yuan, up 68.2% year on year; net profit for the first half of 2023 was 465 million yuan, up 78.0% year on year.
The interim dividend was HK9.06 cents per share, up 60.6% year over year, with a dividend rate of 40%. The company plans to increase its dividend payout efforts, raise the dividend rate to 60% over the next 2-3 years, and increase returns to shareholders.
Sales reimbursement, Shanghai's regional share increased: As of mid-2023, cemetery services, funeral services, and supporting services were 1,287 million, 224, and 013 million yuan, respectively, accounting for 84.4%, 14.7%, and 0.9% of the company's segment revenue. Looking at the subregion, the company's revenue from Shanghai, Liaoning and Anhui, was 734 million, 112 million yuan, and 102 million yuan, respectively, up 123%, 52%, and 12% year-on-year, accounting for 48.6%, 7.5%, and 6.8%, respectively.
Cost and expense ratios declined and profit margins increased: In the first half of 2023, as the scale of revenue increased, the company's various cost and expense ratios declined. Employee costs, engineering costs, material and material consumption, and marketing expenses accounted for 18.0%, 3.6%, 7.2%, and 1.7% of revenue, respectively, reaching 30.5% in total, down 7.9 percentage points from the same period last year. Operating profit margin and net interest rate were 55.4% and 30.5%, respectively, up 10.3 and 1.7 percentage points from the same period last year. Continuing to maintain a high level of profitability.
Continued expansion and sufficient reserves: As of mid-2023, the company operated a total of 34 cemeteries and 32 funeral service facilities. During the period, the company acquired 100% of Yan'an Hongfu's shares. The project is an integrated funeral project composed of an operating cemetery and funeral services. The company expanded its business scope to Shaanxi. The company has sufficient land reserves, with a total remaining saleable area of 2.6 million square meters, and a usable area of 20,200 square meters in the first half of 2023. In the future, the company will continue to expand its regional layout and obtain more projects through cooperation, mergers and acquisitions, etc. The company holds about 3 billion yuan in cash. Abundant cash is a guarantee for the company to continue to expand its business.
Maintaining the “increase in holdings” rating, the target price is HK$7.80: The company's business recovered rapidly in the first half of 2023, revenue and profit increased simultaneously, and profit margins improved. The company is actively expanding new projects, entering Shaanxi for the first time, and expanding its business footprint. We expect the company's net profit attributable to shareholders of listed companies in 2023/2024 to be 800 million yuan and 1.02 billion yuan, respectively, an increase of 33.8% and 15.7% year-on-year, respectively. We maintain the company's “increase in holdings” rating, with a target price of HK$7.8, which is equivalent to 18/16 times PE in 2023/2024.
Risk warning: industry regulatory risk; industry competition is fierce; acquisitions do not meet expectations; integration of new acquisition projects falls short of expectations.
