Expanding scale and improving quality, the four major sectors collaborated to help performance take off, and gave the “buy” rating Greentown Service based on property services, lifestyle services and urban services as the two wings, independent equity, and a high share of third-party expansion. The company's property service sector continues to grow in management area, with sufficient reserve area. Park services, consulting services and technology service businesses are developing collaboratively and steadily progressing. We expect the company's net profit to be 7.41, 8.95, and 1,018 million yuan for 2024-2026, corresponding EPS of 0.23, 0.28, and 0.32 yuan. The PE corresponding to the current stock price is 12.4, 10.3, and 9.0 times. First coverage, giving a “buy” rating.
Revenue growth and profitability were stable. Third-party expansion accounted for continuous steady growth in the operating income of enterprises in 2018-2023. In 2023, it achieved revenue of 17.411 billion yuan, an increase of 17.1% year on year; core operating profit of 1,296 billion yuan, an increase of 32.1% year on year. The company is mainly expanding its business through shareholding or strategic cooperation with central state-owned enterprises and leading industry customers. By the end of 2023, the share of the company's management area and reserve area from the related party Greentown China was 15.7% and 8.0% respectively. Third-party management area was higher than that of peers, and there were more than 200 cooperative central state-owned enterprise customers.
Steady ballast for property services and continuous expansion of management area
Due to the steady increase in the area under management, the company's property service revenue in 2023 was 11.10 billion yuan, up 17.5% year on year, accounting for 63.8% of main revenue. Property service gross margin was 13.0%, up 0.9 percentage points year on year. The company focused on deep cultivation in the region and formed a number of major cities such as Hangzhou, Ningbo, and Hefei to occupy deep cultivation areas. By the end of 2023, the company's managed area reached 448.4 million square meters, an increase of 16.7% over the previous year, of which the residential sector accounted for about 80%.
The company's average property fee in 2023 was 3.24 yuan/square meter/month, the average unit price of Xintuo's existing residential buildings was 3.65 yuan/square meter/month, and the project acceptance rate was 95.2%. As of the end of 2023, the company's non-residential projects accounted for 20.3% of the management area, and Xintuo's share of non-residential revenue increased 3.4 percentage points to 46.9%. There is plenty of room for future growth in the non-residential sector.
The collaborative development of park services, consulting services, and technology services led to steady growth. The company's main revenue from park services, consulting services and technology services in 2023 accounted for 20.5%, 13.2%, and 2.5%, respectively, compared with +25.0%, +11.1%, and -12.6%, respectively. The three major sectors have perfected the company's construction in the fields of culture and education, home life, asset management, real estate consulting, digital construction, etc., and are an important complement for the company to achieve full life scenarios and property services throughout the real estate life cycle. The company is expected to rely on the collaborative development of the four major sectors to achieve a double increase in revenue and profit.
Risk warning: The real estate industry is declining at an accelerated pace, and the company's expansion is falling short of expectations.