Core views

In 2023, the company achieved operating income of 15.63 billion yuan and completed the target set at the beginning of the year. During the period, the company's net profit growth rate reached 24.0%, which was higher than the 20.0% revenue growth rate.

The company plans that the 2024-2026 dividend ratio will not be less than 25% to further enhance shareholder returns. The company's property management sector progressed steadily during the period, with a management area of 350 million square meters, and the gross margin of the value-added service business increased. The asset management business achieved revenue of 70 billion yuan, an increase of 50.1% over the previous year. The total leasable area of owned properties is 469,000, and the occupancy rate is 96%.

summary

The performance is steady, and the dividend ratio will increase to more than 25% in the next three years. In 2023, the company achieved operating income of 15.63 billion yuan, an increase of 20.0% over the previous year, and achieved net profit of 760 million yuan, an increase of 24.0% over the previous year. The main reasons why the company's net profit growth rate during the period was higher than the revenue growth rate: (1) the low base effect, real estate rent was reduced by 86 million yuan last year, corresponding to net profit attributable to mother of 81 million yuan; (2) the income tax rate fell from 30.8% in the same period last year to 20.4% in the same period last year. The company plans to increase the dividend ratio to 24.5% in 2023, and plans to have no less than 25% dividend ratio in 2024-2026 to further enhance shareholder returns.

The scale of property management is progressing steadily, and the profitability of value-added services has increased. During the period, the company's management area reached 350 million square meters, up 10.7% year on year, and property service revenue was 14.76 billion yuan, up 18% year on year. The gross margin of specialized services in the value-added service business increased 1.5 percentage points to 17.8%, and platform value-added services increased 2.5% to 8.5%.

Revenue from commercial operations increased significantly, and the rental rate of owned properties remained at a high level. The asset management business achieved revenue of 70 billion yuan, an increase of 50.1% over the previous year, mainly due to revenue recovery after the pandemic and the low base effect of rent relief during the same period. The overall occupancy rate for owned properties was 96%.

Maintain the buy rating and lower the target price. We forecast the company's EPS for 2024-2026 to be 0.85/1.03/1.23 yuan (the original 2024-2025 was 0.92/1.11 yuan). An industry-comparable company's PE valuation in 2024 was 14X, giving the company a 30% valuation premium to 18X, corresponding to a target price of 15.24 yuan (the original target price was 21.75 yuan).

Risk warning: 1. Project expansion falls short of expectations; 2. Profit margin repair falls short of expectations.