The company's recent situation

The company announced the share incentive plan on June 26, granting a total of 71.243 million share options to the company's management and other employees, accounting for 2.3% of the company's total share capital, and the corresponding exercise price of HK$3.49.

reviews

The equity incentive plan was officially implemented. The company's current equity incentive plan was awarded to some directors, executives and some core employees of the company. A total of 71.243 million share options were granted, accounting for 2.3% of the company's total share capital, and the exercise price was HK$3.49. Among them, Chairman Yang Zhangfa and CEO Jin Kelly were awarded 4.5 million shares and 3 million shares respectively. The share options were unlocked in three installments, and the corresponding unlock ratios were 33%/33%/34% for 1/2/3 years from the grant date (that is, June 26, 2026, June 26, 2027).

Unlocking the required performance targets shows the company's confidence. The performance target for this share option unlocking requirement is that the company's core operating profit in 2024/2025/2026 increased by no less than 20%/40%/60% compared to 2023 (that is, corresponding to the 2024-2026 increase of the company's core operating profit by 20%/17%/14% year on year, respectively), and the individual employee assessment results also met the individual performance goals; the performance unlocking target of this incentive exceeds the performance growth guidelines given by the company before (core operating profit growth rate of not less than 15% in 2024), which shows the company's performance for the next three years Increased confidence.

The company is expected to continue its steady and progressive development trend. The efficiency optimization and strategic focus of the company's internal reforms has begun to bear some results in the past 2 years. We expect that the operating side may continue to achieve the results of improving quality and efficiency in the first half of this year. The goal of unlocking equity incentives has also enhanced the certainty of profit growth on the company's core management side. Based on its core competitive advantage in the basic property management business side, we are optimistic about the company's development prospects in the medium to long term. Considering the continuous improvement of corporate governance and the importance placed on the shareholder return side (the 2023 repurchase amount corresponds to 22% net profit ratio and 72% dividend ratio), we believe that the company's medium- to long-term value is also expected to receive some support.

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 32% upside. The company is currently trading at 14 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.