Key points:

The net profit of the 2024H1 company turned a loss into a profit, and after deducting non-net profit losses, the loss was reduced. On July 12, I Love My Family released the 2024 semi-annual results forecast. The company expects 2024H1 net profit to be 24 million yuan to 35 million yuan, a loss of 48.81 million yuan for the same period last year, turning a loss into a profit; net profit after deducting non-recurring profit and loss is a loss of 30 million yuan to 49 million yuan (loss of 57.91 million yuan for the same period last year), which is less than the loss for the same period last year; basic earnings per share is 0.0102 yuan/share, and -0.0207 yuan/share for the same period last year.

The recovery in 2024Q2 second-hand housing sales and sales volume helped the company's performance recover. According to the performance forecast, due to the large drop in second-hand housing transaction amounts in first-tier cities in 2024Q1 compared to the same period last year, the company's total housing transaction value (GTV) also declined markedly. The decline in GTV in the first quarter was mainly affected by two factors. First, the volume base for the same period last year was high, and second, second-hand housing transaction prices dropped significantly this year compared to last year. However, the relaxation of 2024Q2 real estate-related policies continued to increase. In particular, starting in May, some cities further optimized or lifted purchase restrictions, and the central bank implemented policies such as lowering the down payment ratio for home purchases and abolishing the lower limit on mortgage interest rates. Second-hand housing transactions in core cities where the company does business (such as Beijing, Shanghai, Hangzhou, etc.) showed a good recovery trend. According to Wind data, the number of second-hand housing units sold in Beijing, Shanghai and Hangzhou in May-June was +0.2%/+12%, +6.3%/+44%, +1.7%/+21%, respectively; the number of second-hand housing units sold in Beijing and Hangzhou in May-June was +3%/+29% and +50%/+128%, respectively; Shanghai lacked year-on-year data, but the number of units sold in June reached 0.026 million units, a record high since September last year. Benefiting from the strong recovery of the second-hand housing market in core cities, the company's second-hand housing sales and sales volume showed good year-on-year growth in May-June, which contributed positively to the company's performance.

On the one hand, reducing costs and increasing efficiency, and revitalizing assets and focusing on the development of the main business, the company continued to strictly control various expenses in the first half of the year to further reduce various operating costs such as store rent, renovation costs, and sales expenses. The 2024Q1 company's fee rate for the period was 20.65%, down 0.12pct and 1.05pct from 2023Q1 and 2023, respectively. Meanwhile, the company sold assets related to the New Era Hotel in Kunming, Yunnan in 2024Q1, contributing approximately 80 million yuan to the company's net profit (non-recurring profit and loss). The transaction helped the company reduce its interest-bearing debt ratio, optimize asset structure and resource allocation, improve asset quality, better concentrate resources to focus on main business development, and enhance operating efficiency and profitability. Furthermore, the share payment fee for the 2024H1 employee shareholding plan fell to 8.85 million yuan (22.13 million yuan in the same period last year), and was fully amortized in the first half of the year.

Investment advice

5.17 After the New Deal, first-tier and second-tier cities actively optimized their property market policies. Second-hand housing transactions have picked up markedly since May. We believe that in the context of inventory removal, there is still room for relaxation in property market policies to further support transaction recovery. The company's business layout is in first-tier and core second-tier cities, especially Beijing and Hangzhou, which remain at the top. Shanghai's share is steadily increasing, and the recovery in second-hand housing transactions is beneficial to the growth of the company's brokerage business. At the same time, the company reduced costs and increased efficiency to improve operating efficiency, and profitability is expected to improve.

Our revenue forecast for the company's main business is as follows: (1) Brokerage business: The company's GTV declined in the first quarter, but sales volume rebounded in the second quarter. We expect that with continued support from the inventory removal policy, second-hand housing transactions in the core cities of the company's layout will maintain a recovery trend. However, considering the current high volume of second-hand housing listings and prices still under pressure, GTV will maintain a steady recovery. The growth rate of brokerage business is expected to be +10.5%/+14.5%/+17.9%, respectively, in 2024-2026. (2) New housing business: Considering that demand in the new housing market is still weak in 2024, and that land acquisition and new construction are still low, thereby limiting the supply of new homes, it is expected that the situation of weak supply and demand for new homes will continue until next year. Therefore, the revenue growth rate of the company's new housing business is expected to be -5%/-2%/+2% in 2024-2026, respectively. (3) Asset management business: The scale of the company's asset management business has been steadily expanding. The number of properties under management increased by 7.2%/0.4%/6.7% year-on-year respectively in 2021-2023, and the average number of days out and occupancy rates continued to improve. Therefore, the revenue growth rate of the company's asset management business is expected to be +5.9%/+7%/+5% in 2024-2026, respectively.

In summary, we expect the company's 2024-2026 net profit to be 0.095/0.185/0.274 billion yuan, EPS 0.04/0.08/0.12 yuan, respectively. The PE corresponding to the current stock price is 66.6x/34.1x/23.1x, respectively. For the first time, coverage gives the company an “increase in holdings” rating.

Risk warning

The implementation of property market policies fell short of expectations; second-hand housing recovery fell short of expectations; asset management business development fell short of expectations.