Core views:

Steady growth in performance. In '23, the company achieved revenue of 15.63 billion yuan, +20% year-on-year; exceeding the revenue target of 15 billion yuan planned at the beginning of the year. Gross profit of 1.81 billion yuan, +17% year on year, net profit attributable to mother was 740 million yuan, +24% year on year; net profit without return to mother was 660 million yuan, +32% year on year. Considering that the rent reduction in '22 affected revenue of 86 million yuan and the impact on the return of 81 million yuan, if the impact of the rent reduction in '22 is reverted, net profit returned to mother +9% in '23, after deducting +14% of non-return net profit.

The performance was outstanding. The revenue performance of basic residential property management is average, and the semi-annual revenue scale of the non-residential sector has gradually expanded over the past 20 years. In '23, revenue from residential infrastructure management was 3.4 billion yuan, +8% year on year; revenue from non-residential infrastructure management was 8.7 billion yuan, +26% year over year. The outstanding performance of non-residential infrastructure management mainly comes from: (1) The area under management of 210 million square meters of non-residential buildings in 23 years, +17% over the same period last year. Looking at the non-residential business structure, the main increase came from the urban space sector, which had a net increase of 36.36 million square meters during the year, and the public service sector actively decreased its share, with a net decrease of 22.57 million square meters. (2) Internal improvement in floor efficiency driven by changes in business structure ratio. Non-residential sector efficiency was 3.66 yuan/square meter/month, +10.9% year-on-year. From a business perspective alone, only office and public businesses achieved an increase in floor efficiency. Among them, office sector efficiency was +52.7%, and public sector efficiency was +37.6% (increase in floor efficiency driven by abandoning inefficient projects in the public sector).

Steady expansion. The amount of new contracts signed by the company in '23 was 4.04 billion yuan, +22% compared with the same period last year. Of these, the amount of new contracts signed by related parties and third parties was 500 million yuan or 3.54 billion yuan. The value of new contracts signed by third parties increased in half a year, with 1.65 billion yuan and 1.89 billion yuan respectively in the first half of the year, +16% and +39% compared with the same period last year.

Profit forecasting and investment advice. The company expanded steadily, adjusted its structure within the year, repaid payments, and achieved a deceleration in accounts receivable at the end of the period for the first time. The company's net profit for 24-25 is estimated to be 90 billion yuan and 1.08 billion yuan, with corresponding growth rates of +22% and +20%, respectively. The company is given a 24-year PE = 16X, corresponding to a reasonable value of 14.4 billion yuan, and a reasonable value of 13.58 yuan/share per share, maintaining a “buy” rating.

Risk warning. Rising labor costs, termination or non-renewal of service contracts, cost reduction and efficiency falling short of expectations, asset divestment falling short of expectations, and industry policy risks.