The company's recent situation
We recently investigated Wanwuyun Olympic Sports Sunshine World, a community commercial project in Fuzhou Jianxin Nandiecheng, and exchanged views with Wanwuyun Community Commercial Business Line Leaders and others.
reviews
The “Butterfly City+ Social Business” model pilot has begun to bear fruit, and the ecological linkage upgrade continues to advance. We believe that the butterfly city model can be divided into two stages of empowering social commerce at Olympic Sports Sunshine World:
Stage 1: Customer base drainage, efficiency improvement and cost reduction. The core approach at this stage is to open up customer data and marketing channel resources for property and commercial management: on the one hand, the commercial management platform accurately marks owners and members of surrounding communities to achieve accurate marketing activities and increase exposure and conversion rates; on the other hand, the business management team uses community advertising, stall activities, and property manager promotion to strengthen marketing efforts, while also saving marketing costs. The core effects of this phase were increased passenger flow and optimization of customer acquisition costs: the company revealed that in 2023, the average daily passenger flow of social merchants built in Nandiecheng increased 44% year-on-year, in-market sales increased 20% year-on-year, while commercial management companies' gross margin increased by 10ppt to 49% year-on-year.
Phase 2: Investment promotion, co-creation, operation quality improvement. The core approach at this stage is that Diecheng fully empowers social commerce and investment promotion reform: on the one hand, all Diecheng business teams can participate in the expansion of investment channels; on the other hand, it actively encourages owners to jointly build social businesses. For example, this project initiated a community vote on the “10,000 Food Market” investment promotion area with an area of about 18 million square meters, and invited owners to nominate and vote for their favorite brands. Considering the characteristics of highly targeted community commercial coverage and a high degree of localization of brand portfolios, we believe that recruitment guided by owners' opinions and full development of local investment channels are all ways to “treat the symptoms” to improve the quality of operations, and subsequent effects need to be continuously observed.
There is room to optimize existing social commerce and the layout of competitors is limited, so Wanwuyun may be expected to form a differentiating advantage. Through research, we believe that the basic characteristics of the community commercial market include abundant supply (such as a large number of undertakers built along with the housing development cycle), but the supply of high-quality products is limited and scattered, and mainstream commercial management operators are still less involved. Although the size of community commerce is small, it is not that the barriers to operation are lower. Considering that its customer base is characterized by its small coverage and high single customer visit rate, the key point of investment promotion and operation is to fully meet the needs of surrounding customer groups with differentiated brands; therefore, unlike the characteristic that headquarters MediaTek brands account for a relatively high proportion of other standardized businesses, community commerce is highly dependent on the project team's ability to explore local specialty brands. Meanwhile, Wanwuyun's social business team continues the Sunshine Zhibo team, with a high internal training ratio of personnel and relatively rich experience in social business operations. Combined with the full connection of Diecheng resources, we believe that Wanwuyun may gradually build its own differentiated competitive advantage.
Profit forecasting and valuation
Keep the profit forecast unchanged (the contribution of community commerce to the company's overall performance may be gradually reflected in 2025 and beyond with the opening of external development projects). Maintain the outperforming industry rating and raise the target price by 17% to HK$33 (corresponding 15 times the 2024 price-earnings ratio and 21% upward space) to reflect the improvement in investors' risk appetite under the introduction of active policies on the real estate side. The company traded 12.6 times the 2024 price-earnings ratio.
risks
The progress of community commercial outreach fell short of expectations; the progress of the expansion and renovation of Diecheng fell short of expectations.