Event: Jinmao Service's 2023 revenue +11%, net profit to mother +0.4%, and dividend ratio 41%.
Jinmao Service announced its 2023 annual results. The company achieved revenue of about RMB 2.7 billion, an increase of 11.0% year on year, realized gross profit of about RMB 750 million, an increase of 1.7% year on year, and net profit to mother was 340 million yuan, an increase of 0.4% year on year. The company declared a final dividend of HK$0.17 per share, with a dividend ratio of 41%.
Comment: Scale expansion is accelerating, cash is plentiful and dividends are stable, and there is still great potential for performance growth.
1) Scale expansion is accelerating, infrastructure management is growing rapidly, and demand for value-added services is slowing down. By the end of 2023, the company's contract area exceeded 100 million square meters, covering 70 cities in China, with a management area of 84.2 million square meters, an increase of about 27 million square meters over the end of 2022. Rapid scale expansion led to a high increase in the company's basic property management business performance. In 2023, the revenue from basic property management/community value-added management/non-owners' value-added business was 15.7/62/50 billion yuan respectively, +30.5%/-3.1%/-13.7%. Non-owners' value-added business revenue declined due to the impact of the real estate development industry. The reduction in decoration demand and community consumption demand also affected community life and the development of the Mercure business, causing the company's community value-added business revenue to decline in the second half of 2023.
2) Consolidate the positioning of high-quality property management and continue to cultivate high-energy cities. The company focuses on high-end property management in Tier 1 and 2 cities. In terms of market expansion, it adheres to the principle of high quality and high quality, and focuses on high-energy cities. During the year, 154 new projects were signed, and 83% of the newly signed projects were located in Tier 1 and 2 cities, and the overall quality of the projects was high; in January 2024, the target company mainly provided property management services for high-end residential and commercial projects, in line with the company's strategy; As of the end of 2023, Shengrui Property had a management area of about 8 million square meters, mainly in high-energy cities such as Beijing and Guangzhou The geographical distribution of management projects is also highly consistent with the company, which is conducive to creating scale effects and synergy effects.
3) Cash is abundant and dividends are stable, and there is still great potential for performance growth. The company's net operating cash flow in 2023 was 450 million yuan, a significant increase over 2022 (150 million yuan). The company's 2023 dividend amount was about 140 million yuan, and the dividend ratio was stable. According to the closing price on April 15, 2024, the company's dividend rate was about 8.1%, which had high allocation value; the company's related party, Jinmao, China, continued to deliver high-quality residential projects, and the company's basic property management growth was strongly guaranteed. At the same time, it gave Jinmao Services more business collaboration at the value-added service level, such as opening up the membership system of Jinmao in various business formats in China. Continuously stimulate customer demand for value-added services, and the company still has plenty of room for future performance growth.
Profit forecast, valuation and rating: The company is a rapidly growing high-end property management target. The rate of scale expansion is increasing, and there is a strong guarantee for basic property management growth; the share of real estate-related businesses has decreased, and the revenue structure has been optimized. We have reduced the revenue and profit forecast for non-landlords, forecasted net profit of 3.9/450 million yuan for 2024-2025, and an additional forecast for 2026 to 51 million yuan, corresponding EPS of 0.43 (original forecast 0.46) /0.56 yuan. The current stock price corresponds to 2024- In 2026, PE was 4/4/3 times. The company has a central enterprise background, managed projects of high quality, attractive valuations, and maintained a “buy” rating.
Risk warning: The development of value-added services fell short of expectations, and increased competition for outreach led to project expansion falling short of expectations.