1H2023 shareholders' net profit declined by 20.7% YoY. A-Living's (the "Company") 1H2023 shareholder's net profit recorded RMB839 mn, declined by 20.7 YoY, mainly dragged by thinner GPM and much higher selling and marketing expenses. We will review our earnings forecasts in our next company report.Considering the slowing growth prospect and still unremoved related-party risk, we may also maintain "Neutral" investment rating in the next company report.
Slowing revenue growth and weaker profitability. A-Living's top line growth slowed down with YoY growth of only 1.0%, reaching RMB15.4 bn in 1H2023. If we separate its business into cyclical and non-cyclical business, the Company's non-cyclical business (basic property management, property owners VAS and city services) recorded solid growth of 7.2% YoY in 1H2023. 1H2023 GPM declined by 6.5 ppts to 20.4%, but slightly rebounded from that of 17.2% in 2H2022. If we looking into the GPM of basic property management, it recorded 18.9% in 1H2023, down by 2.4 ppts YoY, mainly due to the increasing proportion of managed GFA in public facilities. Selling and marketing expenses increased by 79.2% YoY in 1H2023, mainly due to increasing cost in market expansion activities and development of new VAS business, such as group meal. After no dividend paid in 2022, the Company announced interim dividend this year, at RMB0.025/share. According to the management, the Company will adopt a more flexible dividend policy depending on the cash position.
Concerns on related-party risk remain. The Company's total accounts receivable in 1H2023 continued to grow by 1.1% YoY to RMB10.829 mn. After a significant write-off of accounts receivable last year, we believe A-Living's related-party risk has not been fully removed and still was one major concern of investors.
Public facility management should be a major focus in the next step. In 1H2023, 67.3% of the Company's newly-acquired contract GFA came from public facilities. The Company also expanded fast in city services. In the first half of 2023, the Company obtained the city service project in Yuanshan Sub-district of Longgang District, Shenzhen, which brought an annualized contract value of more than RMB100 mn. By the end of 1H2023, the Company had a total number of 106 projects under its city services.