Backed by the central enterprise platform, CNOOC Property has profoundly benefited from the Group's collaborative advantages and has been deeply involved in property management services for many years. The company has long-term and stable delivery support for China's overseas development; at the same time, CNOOC Properties' central enterprise background has formed a strong reputable brand endorsement during expansion, laying a solid foundation for the company's comprehensive development of basic property management+value-added services in recent years. In 2018, the company established an overall development strategy to continuously improve customer satisfaction and business scale. Since then, the company has fully expanded its business into the market. The area of 2023H1 under management has grown to 360 million square meters. Property management service revenue also increased year by year. In 2022, the company's property management service revenue increased 42.9% year over year to HK$9.45 billion, and 2023H1 increased 17.7% year over year to HK$5.16 billion.
The continuous development of basic property management is the continuous strengthening of external development. 2023H1 accounts for nearly 75% of new external development contracts. The area of new external development contracts has also been growing rapidly in the past two years, and external development capabilities are continuously being verified by the market.
Second, the related party China's overseas development and land acquisition performance has been steady, protecting the growth of the company's basic market area under management. In 2023, China Overseas Development and its subsidiaries achieved a full-caliber sales area of 13.36 million square meters, and the amount of equity land acquired increased by 42.2% over the same period last year. Land acquisition is highly focused on core cities. These cities have more certainty in sales and relatively high property fee pricing, providing the company with a stable increase in the area under management after delivery. Third, the share of non-residential properties continues to rise, helping to move through the real estate cycle. By 2023H1, the share of the company's non-residential properties in the management area had increased to 28.2%; of the new management area during the same period, non-residential properties accounted for 55.2%.
Among value-added services for non-residents, the full-cycle management of value-added engineering services has developed rapidly, taking advantage of policies. The company's revenue from value-added services for non-residents remained high, with a 3-year CAGR of about 32%, including four sub-businesses: engineering services, pre-delivery services, sales inspection services, and consulting services. Among them, engineering services are growing rapidly, integrating upstream and downstream supply and providing full-process property management solutions through the “first line and five chains”. In terms of policy, relevant leaders of the Ministry of Housing and Construction have repeatedly mentioned the need to “improve the management mechanism for the entire life cycle of housing, from development and construction to maintenance and use.” The company's Haibo Engineering and Xinghai IoT have benefited from policies and have developed rapidly in recent years, which is a relatively clear direction for real estate growth in the downward cycle.
Value-added services for households benefit from the expansion of management area and economic recovery, and there is broad room for growth. Based on the excellent reputation accumulated by basic property services on clients, the company has continued to expand and innovate in recent years. Value-added consumer services have shown leaps and bounds. The 3-year CAGR of revenue is 26.9%, and the gross profit contribution is high. In terms of sub-businesses, home living services and commercial service operations grew rapidly, with a compound revenue growth rate of 53.3% in 2021-2022. Home living services are based on the company's continuous growth in management area, and relatively rigid daily living requirements provide a steady basic market for the company's performance; at the same time, diversified and customized housing service requirements will bring more growth flexibility to the company's performance.
Investment advice: We believe that the company's basic property management internal and external expansion will continue to expand, and there is plenty of room for non-residential property management. At the same time, there is great potential for growth in value-added services for engineering and value-added household services, and there is strong performance certainty.
We expect the company's 2023/2024/2025 revenue to be HK$152.1, 182.1, and HK$21.63 billion; net profit to mother of HK$15.4, 18.5, and HK$2.21 billion, respectively; corresponding EPS of HK$0.47, 0.56, and 0.67 per share; and corresponding PE of 12.3, 10.2, and 8.6 times. First coverage, giving a “buy” rating.
Risk warning: The expansion of the management area falls short of expectations, rising labor costs, and the integration of mergers and acquisitions projects falls short of expectations.