Operating income was +17% year over year, net profit to mother was +11% year over year, in line with expectations, and the dividend rate rose to 73%. In 2023, the company achieved revenue of 17.39 billion yuan, +17.1% year on year; core operating profit of 1.30 billion yuan, +32.1% year on year; realized net profit of 610 million yuan, +10.6% year on year, in line with market expectations; basic earnings per share of 0.19 yuan, +11% year on year; gross margin and net profit margin to mother were 16.8% and 3.5%, +0.6 pct and -0.2 pct year on year, respectively; sales and marketing expenses of 340 million yuan, +28.7% year on year; administrative expenses of 1.27 billion yuan, +10.4% year on year, Lower than the revenue growth rate of 17.1% and the management expense ratio of 7.3%, -0.4 pct year over year. Changes in performance are mainly due to: 1) steady increase in management scale; 2) gross margin has been repaired and management rates have been optimized. In addition, the company plans to pay HK$0.15 per share, corresponding to a dividend rate of 73%, an increase of 21pct over the previous year.

In 23 years, the area under management was +17%, and third parties accounted for 84% of the managed area. At the end of 2023, the company's managed area reached 450 million square meters, +16.7%; the reserve area reached 370 million square meters, -2.0%; the reserve/management coverage ratio was about 0.8 times; Xintuo's annual saturated revenue was 4.32 billion yuan, +6% year-on-year, of which non-residential accounts for 46.9%. At the end of 2023, residential and non-residential areas accounted for 80% and 20% respectively; 2) Greentown real estate and third parties accounted for 15.7% and 84.3% respectively; 3) East China/Bohai Rim /Pearl River Delta/other regions accounted for 69.2%/11.6%/5.9%/13.3% respectively.

Property service revenue +18% YoY, park service revenue +25% YoY, gross margin increased. In 2023, the company's property services, park services, consulting services and technology services achieved revenue of 111.0, 35.7, 23.0 million yuan, respectively, or +17.5%, +25.0%, +11.1%, and -12.6%, respectively, accounting for 63.8%, 20.5%, 13.2%, and 2.5%, respectively. The gross margins were 13.0%, 21.5%, 23.4%, and 38.7%, respectively, compared with +0.9, +0.7, and -2.2 pct. In consulting services, construction services and management consulting services were +11.0% and +11.7%, respectively, accounting for 88% and 12% of consulting service revenue; in park services, park products and services, home living services, park space services, property asset management services, and cultural and education services revenue were +11.7%, +113.5%, +12.3%, +17.5%, and +26.1%, respectively, accounting for 35.6%, 15.3%, 7.8%, 21.8%, and 19.4% of park service revenue. The gross margins of property services, park services, and value-added services have all increased due to measures to improve quality and efficiency.

Investment analysis opinions: Steady increase in performance, restoration of profit margins, increase in dividend rates, and maintenance of the “buy” rating. Greentown Services achieved stable and continuous expansion through third-party expansion. The company is known for its service quality. The region focuses on the Yangtze River Delta. The collection rate, renewal rate, and bid winning rate are all at a high level in the industry, and the ability to raise property fees is relatively strong, medium- to long-term profit margins are more stable, and it is expected to take the lead in exploring value-added service space in the later stages of the industry, and is expected to lead the gold track of the property management industry. Considering the downturn in the industry, we lowered the company's 2024-25 earnings forecast to 0.22 and 0.25 yuan (previously 0.26, 0.32 yuan), and introduced a 2026 earnings forecast of 0.28 yuan per share. Considering that Greentown Services is a third-party quality property management company, it is expected that it will benefit from the optimization of the real estate and property management pattern in the future, and profit margins are expected to gradually improve and maintain the “buy” rating.

Risk warning: The expansion of value-added services has fallen short of expectations, and profit margins have declined due to rising labor costs beyond expectations. There is still uncertainty about lawsuits involving them.