The company's recent situation

Greentown Services recently participated in our 2024 mid-term strategy meeting and shared with investors the company's recent business situation.

reviews

The competitive expansion is progressing steadily, and the pace of expansion is in line with expectations. The company's competitive expansion performance from January to May was stable. Considering that the company raised the project expansion threshold, we expect the quality of the project to be better than the same period last year. In terms of the pace of expansion, we expect the company's expansion progress in the first half of the year to be basically the same as the same period last year (1H23's new expansion contract amount is 1.52 billion yuan, accounting for about 35% of the annual expansion ratio), and it will steadily advance towards the full year target (the company aims to have an annual contract amount of no less than 4 billion yuan for the 2024 expansion project).

The collection rate may have improved year over year, and operating cash flow performance is expected to be stable. From January to May, the company continued strong repayment collection measures and stepped up cash flow repayment assessments at the regional and city company levels. We expect that the comprehensive collection rate may improve to a certain extent over the same period last year. We expect the year-on-year operating cash flow performance to be relatively stable. On the one hand, the company's increased assessment efforts are beneficial to account recovery, and on the other hand, it also takes into account the good prepayment performance of the company's C-side customers at the end of 2023.

Business performance is expected to be steady and progressive in the first half of the year. Considering the steady transformation of external development projects, we expect that the company's main basic property management business will continue to grow rapidly in the first half of the year; in the park service sector, the company clearly gradually shut down business segments that increase revenue without increasing profit, and focus on product and profitability development of the park's core service business. We expect revenue growth to slow down or relatively slow down, but profitability will continue to increase. The efficiency optimization and strategic focus of the company's internal reforms in the past has had some results on the financial side in 2023. We expect that the operating side may continue to achieve the effects of improving quality and efficiency in the first half of this year (the company guidelines 2024 revenue increase of no less than 10% year on year, core operating profit increase of not less than 15% year on year, and comprehensive collection rate increase of no less than 1 percentage point).

Profit forecasting and valuation

Keeping the profit forecast unchanged, the company's net profit is expected to increase by 20% and 17% year on year in 2024 and 2025, respectively (corresponding to a 17% and 15% year-on-year increase in core operating profit). Maintaining an outperforming industry rating and target price of HK$4.6, corresponding to the target price-earnings ratio of 18 times in 2024, implying 21% upside. The company is currently trading at 15 times its 2024 price-earnings ratio.

risks

The company's progress in improving quality and efficiency falls short of expected risks, impairment improvements in some asset classes fall short of expectations, and third party external development competition increases risks, etc.