Transformed from a leading traditional real estate agent to a digital residential service platform. I Love My Family is the first leading real estate brokerage company to enter the A-share board. The company's business layout covers a comprehensive range. The main business includes brokerage business, housing asset management, new housing business, and commercial asset management, and the business scope focuses on 15 core cities. The company is accelerating the digital infrastructure upgrade of Internet services and penetration coverage in key business areas. The Xiangyu brand has achieved internet-based end-to-end operation, and the brokerage and new housing business continue to be digitally upgraded to create customer value. Up to now, all of the company's directly managed cities and key member cities have completed the coverage of the CBS2.0 system for new homes.

The second-hand brokerage business is a high-quality racetrack, and there is room for long-term growth in stock housing. Due to concerns about the risk of on-time housing completion and expectations of a further decline in housing prices, second-hand housing, which is generally low in price and has no risk of completion, has gradually become dominant in the housing exchange market, accounting for 40% of stock housing sales in 2023. In Q1 2024, first-tier cities in the north accounted for more than 50% of second-hand housing. Core second-tier cities such as Wuhan, Chengdu, Nanjing, Hefei, Changsha, and Chongqing also accounted for more than 50%. Nanjing reached 84%, and the popularity of stock housing transactions continued in 24. At the same time, China is expected to add 0.124 billion in urban population by 2030. Core cities have limited availability of new housing, and housing stock will become an important tool for solving housing needs.

Compared with the US, there is a lot of room for improvement in the brokerage service penetration rate in China. The second-hand housing transaction process is complicated, and the transaction cycle is long. At the same time, second-hand housing transactions involve large amounts of capital, and buyer and seller capital transactions are often exposed to high risks. Complex transaction processes mean a strong dependence on brokerage services. In 2016-2021, the penetration rate of brokerage services in real estate transactions in China increased from 43.2% to 49.8%. Considering that the penetration rate of second-hand brokerage services in the US reached 90%, compared with the US, the penetration rate of brokerage services in China still has high room for improvement.

The asset management business has become the company's second growth pole, and it is expected that with the help of JD, it will continue to improve quality and reduce costs. The scale of shared housing has continued to grow since 2020. By the end of Q1 '24, the number of managed properties reached 0.279 million units, which has returned to pre-2020 levels. At the same time, the rental rate reached a new high. By the end of 2023, the company's occupancy rate reached 96.4%. Thanks to the increase in the scale of the company's asset management and the improvement of operational capabilities, in 2023, the company's asset management business achieved revenue of 5.76 billion yuan, accounting for nearly 50% of total revenue. The company's second growth curve has been revealed, and it is expected to improve quality and reduce costs with the help of JD's logistics supply chain, opening up room for long-term growth and imagination.

By reducing costs and increasing efficiency and turning losses into profits, performance is expected to continue to be released. The company insisted on reducing costs and increasing efficiency. The company's rate for the period not including financial expenses in 2023 was 14.6% (the financial rate was affected by the new leasing standard starting in 2021, but the new standard had no impact on the actual operation; see section 7 for details), which is a significant optimization of 5.6 pct compared to the 2021 high. 2024H1, the company expects net profit from mother to turn a loss into a profit (24-35 million yuan). The main reasons are: ① one-time factors affecting profit no longer exist; ② cost reduction and efficiency improvement; ③ optimizing the asset structure and selling non-main business assets. With the disappearance of one-time profit factors and the continuous opening up of existing housing business space, the company's performance is expected to continue to be released.

Profit forecasting and valuation. The company's main business layout is on a high quality track, and the second growth phase continues to improve quality and reduce costs. The company's pattern is clear. Online+offline has built a steady moat. At the same time, the company insists on reducing costs and increasing efficiency and optimizing the asset structure. The net profit from the mother is expected to turn a loss into a profit in the first half of the year, and the performance is expected to continue to be released. We expect the company's revenue for 2024-2026 to be 13.33, 14.95, and 16.89 billion yuan, respectively, and net profit to mother of 0.07, 0.13, and 0.16 billion yuan, respectively. The corresponding PE is 85.3x, 50.0x, and 40.2x respectively, maintaining the “recommended” rating.

Risk warning: risk of declining market share; poor development of asset management business; stock housing market is less popular than expected