Event: The company released its 2023 annual report. For the full year of 2023, the company achieved revenue of 15.63 billion yuan, an increase of 20.0% year on year; net profit to mother was 740 million yuan, an increase of 24.0% year on year. The performance was in line with our expectations.
Revenue performance grew steadily, and profit margins in the property management business declined slightly. The company's revenue for the full year of 2023 increased 20.0% year on year, including revenue from property management business of 14.76 billion yuan, up 128.0% year on year; revenue from asset management business was 70 billion yuan, up 50.1% year on year. The main reasons for the increase in revenue are:
(1) The growth of original property management projects and the increase in new development property management projects; (2) the scale of commercial operation projects under management was expanded; (3) rent was reduced in 2022 in accordance with national policies, but there was no such matter in 2023. In terms of profit margin: In 2023, the gross profit margin of the company's property management business was 10.0%, a slight decrease of 0.6 pct; the gross profit margin of the asset management business was 50.7%, a significant increase of 9.2 pct year on year; the company's comprehensive gross profit margin was 11.6%, a slight decrease of 0.3 pct year on year. In terms of cost ratio: The marketing management rate in 2023 was 4.5%, an increase of 0.3 pct over the previous year.
Continue to seize the beach and break the business format, and continuously improve market expansion capabilities. By the end of 2023, the company had 2,101 projects under management, an increase of 217 over the previous year; the area under management reached 345 million square meters, an increase of 10.9% over the previous year. The company continues to deeply cultivate the non-residential business, accounting for 61.9% of the non-residential business area under management, reaching 213 million square meters. The company is deeply involved in finance, universities, urban services, etc. The amount of new contracts signed in the financial and university industries in 2023 increased by 67% and 31%, respectively. At the same time, the company continues to improve its market expansion capabilities, and achieved a new annual contract amount of 4.04 billion yuan in 2023, of which a new annual contract amount of 3.54 billion yuan was signed for third-party projects, an increase of 27.4% over the previous year.
New value-added business has been introduced, and asset management business has performed steadily. In terms of value-added business: The company voluntarily abandoned some low-margin platform value-added services in 2023, strengthened home service capacity building, and added 7 new service categories; at the same time, it also built an IFM system in depth to become a core IFM service provider for customers such as Huawei, Ali, Ningde Era, Meituan, Xiaomi, and Honor. The gross margin of platform value-added services and professional value-added services increased by 2.5pct/1.5pct to 8.5%/17.8% respectively in 2023. In terms of asset management business: By the end of 2023, the company was managing 70 commercial projects (including preparatory projects), an increase of 18 over the end of 2022, with a management area of 3.97 million square meters; including 3 self-owned projects, 58 investment promotion Shekou projects, and 9 third-party brand export projects. The company owns properties including hotels, shopping centers, office buildings, etc., with a leasable area of 469,000 square meters by the end of 2023, with an overall occupancy rate of 96%.
Profit forecast: As a leading non-residential property management enterprise, the company relies on central enterprise developers to continuously improve its market-based expansion capabilities, and both internal and external expansion are guaranteed. Considering the downturn in the real estate market and increased competition in the property management industry, we lowered our 2024-2025 net profit forecast to $88/999 million (original value was $95/1.16 billion), and the estimated net profit for 2026 is $1.14 billion.
The corresponding EPS is 0.82/0.94/1.08 yuan, and the corresponding PE is 13.6X/11.9X/10.3X, maintaining a “buy” rating.
Risk warning: The scale of the project delivered by the majority shareholders/related parties falls short of expectations; market-based expansion falls short of expectations; management after mergers, acquisitions and investment falls short of expectations.
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