The first half of the year turned a loss into a profit, and cash inflows were positive. The company's revenue for 1H in 2023 was 3.396 billion yuan, down 15% year on year; property management service revenue was 2,924 billion yuan, up 8% year on year; and business revenue for non-related parties was 3.304 billion yuan, up 13% year on year. The decrease in revenue was mainly due to a decrease in revenue from value-added services for non-owners. The company's gross profit for 1H in 2023 was 848 million yuan, a year-on-year decrease of 25%. Among them, gross profit for property management services was 726 million yuan, an increase of 4% over the previous year; net profit for return was 340 million yuan, and net loss for the same period in 2022 was 751 million yuan. In 2023 1H, total trade receivables from company related parties decreased by 131 million yuan compared to the end of 2022; and impairment provisions accrued from trade receivables from related parties were returned 56 million yuan compared to the end of 2022. The net cash flow from 1H's operating activities in 2023 was 6.61 million yuan, compared to -1,009 million yuan for the same period in 2022.
Actively adjust the business structure and recognize revenue on a prudent basis. In 2023, 1H property management service revenue was 2,924 million yuan, up 8.1% year on year; the company adjusted the revenue recognition pace for some related party businesses with low repayment rates. Excluding this part affected 1H property management service revenue growth of 13.8% in 2023.
In 2023, 1H non-owner value-added service revenue was 203 million yuan, a year-on-year decrease of 76.9%. The main reason was that the company adjusted various value-added service businesses for non-owners based on market-based principles. In 2023, 1H community living services amounted to 246 million yuan, a year-on-year decrease of 16.3%. In 2023, 1H commercial operation management services amounted to 22 million yuan, a year-on-year decrease of 79.7%.
Gross profit margins have all declined by category, and the non-owner direction is the main impact. The gross margin of 1H Company in 2023 was 25.0%, down 3.2 percentage points from the same period in 2022, mainly due to the decline in gross margin of value-added services for non-owners and a sharp decline in the gross margin of commercial operations management services during the period due to low repayment rates and the pace of revenue recognition adjustments. By business, the gross margin of 1H property management services in 2023 was 24.8%, down 1.1 percentage points from the same period in 2022; gross margin of value-added services for non-owners was 15.7%, down 10.6 percentage points from the same period in 2022; gross margin for community life services was 35.2%, down 3.1 percentage points from the same period in 2022; and gross margin for commercial operation management services was 14.3%, down 60.4 percentage points from the same period in 2022.
The contract is managed to maintain its scale, and its independence continues to increase. In 2022, 1H's contract construction area was 396 million square meters, and the construction area under management was 263 million square meters. Property management revenue from 1H independent third party development in 2023 was 959 million yuan, accounting for 32.8% of property management service revenue, an increase of 0.5 percentage points over the same period in 2022. Property management revenue from 1H non-residential properties in 2023 was 613 million yuan, accounting for 20.9% of property management service revenue, down 2.5 percentage points from the same period in 2022.
Investment advice: “Better than the market” rating. We predict that the company's EPS in 2023 will be $0.23 per share, giving the company 12-14 times PE valuation in 2023. The corresponding reasonable value range is $2.76-3.22, converted to HK$2.97-3.46 per share. (Exchange rate: 1 HKD = 0.93 RMB). Risk warning: The real estate industry faces the risk of overall contraction. The parent company's debt restructuring is still in progress.