Core views
CNOOC Property achieved operating income of 13.05 billion yuan in 2023, an increase of 19.7% year on year; net profit to mother was 1.34 billion yuan, up 22.8% year on year. The main reasons why the company's current net profit growth rate was greater than revenue: 1) gross margin increased slightly by 0.08 percentage points to 15.94% compared to the same period of the previous year; 2) Effective cost management and management expenses decreased 0.8 percentage points to 3.0% compared to the same period last year. In 2023, the company achieved a management area of 400 million square meters, an increase of 25.4% over the previous year; the amount of new contracts signed was 7.02 billion yuan, an increase of 57.0% over the previous year, and the gross margin of basic property management increased 1.6 percentage points to 15.0%.
occurrences
CNOOC Properties announced its 2023 annual results. In 2023, it achieved revenue of 13.05 billion yuan, an increase of 19.7% year on year; net profit to mother was 1.34 billion yuan, up 22.8% year on year.
Brief review
The performance was good, and the cost reduction and efficiency were effective. In 2023, the company achieved operating income of 13.05 billion yuan, an increase of 19.7% over the previous year; net profit to mother was 1.34 billion yuan, an increase of 22.8% over the previous year.
The main reasons why the company's current net profit growth rate was greater than revenue: 1) comprehensive gross margin increased slightly by 0.08 percentage points to 15.94% compared to the same period of the previous year; 2) Effective cost management and management expenses decreased 0.7 percentage points to 3.0% compared to the same period last year.
The gross margin of basic property management increased steadily, and the amount of new contracts signed increased year-on-year. In 2023, the company achieved a management area of 400 million square meters, an increase of 25.4% over the previous year; the amount of new contracts signed was 7.02 billion yuan, an increase of 57.0% over the previous year; and the gross margin of basic property management increased 1.6 percentage points to 15.0%.
Outreach from related parties and third parties accounted for 59.5%/40.5% respectively, and the area managed by third parties increased 54.7% year-on-year to 160 million square meters. In terms of marginal changes, related parties and third parties accounted for 29.4%/70.6% of the new 81.2 million square meters of management area. The company actively expanded and continued to work towards the 1:1 strategic goal of internal growth and expansion within the management area.
The growth rate of value-added services for owners reached 71%, and profitability was under slight pressure. In 2023, the company's value-added services revenue was HK$3.44 billion, up 33.7% year on year. The revenue share increased 2.8 percentage points to 26.3%, and gross margin decreased 4.9 percentage points to 18.0%. Among them, household/non-household value-added service revenue was 12.9/2.14 billion yuan, up 70.9%/18.3% year on year, gross profit margin 26.1%/13.1%, a decrease of 3.3/12.3 percentage points, and gross profit of 3.4/2.8 billion yuan.
The profit forecast was lowered and the buying rating was maintained. We forecast the company's EPS for 2024-2026 to be 0.50/0.59/0.69 yuan, respectively (the original forecast was 0.57/0.72 yuan for 2024-2025).
Considering that the company is in the first tier of property enterprises, it is expected to maintain a high level of growth in the future, giving the company an average PE valuation level of 14X in 2024, corresponding to a target price of HK$7.49 (the original target price was HK$13.53). Maintain a buy rating.
Risk analysis
1. Business development and value-added services fall short of expectations. Affected by the multiple effects of the epidemic, economic downturn, real estate market downturn, and increased market competition, uncertainty about the company's business expansion and community value-added services has increased, and there is a risk that development will fall short of expectations. Judging from the sensitivity analysis, if the optimistic forecast is that the market space growth rate of the property management industry remains at 10%, the company's revenue growth rate will exceed expectations by about 24.5%. Considering the scale effect of the property management business, the net profit growth rate is expected to reach more than 30%; assuming a neutral industry growth rate of 5%, the expected revenue and profit growth rates are 19.6% and 21.4%, respectively. Under the assumption that the growth rate of the pessimistic industry is -5%, the expected revenue and profit growth rates are 8.8% and 6.1%, respectively.
2. Risk of declining profitability. Competition in the property management market is becoming more intense, which may affect the scale of the company's market expansion and the profit margin level of the project, and gross margin may be under pressure. At the same time, labor costs are rising rigidly, and the dynamic property fee increase mechanism is slowly being formed, and the company's single market profitability is facing downside risks.
3. Increased risk of bad debts. The increase in the company's accounts receivable accounts is affected by the downturn in the real estate industry. The support of related housing enterprises for the company may weaken, lengthening the collection cycle of accounts receivable.