The dual-chain strategy continues to develop, and the full catering layout has been completed. The company proposed a “big community+big logistics” strategy in 2021, focusing on the “Property+Group Meal” development model. It has now completed the logistics catering service layout in all business categories. Currently, it has expanded nearly 50 “Property+Group Meal” projects, entered more than 140 catering service projects, and has the ability to continue to expand independently.

The management area continues to grow, and efforts are being made to expand the non-sustainable business format. Since the launch of Xincheng Yue Service, the overall growth rate of its external development area has been higher than that of the Group's area, and its market competitiveness has continued to improve. As of December 31, 2023, the area under management reached 0.22 billion square meters, an increase of 12.8% over the previous year, and the number under management by third parties increased to 0.11 billion square meters, an increase of 4.6% over the previous year, accounting for 48.9% of the total managed area. At present, Xincheng Yue Service has achieved a balanced layout across all business formats. In 2023, the company successfully expanded a number of high-quality non-residential projects. Among them, the hospital circuit continued to be cultivated, and several new projects were developed, with a total service project of 43, an annual logistics contract amount of 0.2 billion yuan, and an additional contract amount of 0.06 billion yuan. As of December 31, 2023, the company's non-residential business had managed an area of 0.05 billion square meters and revenue of 0.73 billion yuan, an increase of 13.8% over the previous year.

Non-cyclical business has steadily improved, and the “second growth curve” has enabled development. As of December 31, 2023, community value-added services have become the second largest source of revenue, with a gross margin of 35.7%. Among them, non-cyclical businesses continued to develop steadily, accounting for 80%, up 7.7% from 2022. The group meal business gradually improved, with revenue reaching 0.45 billion yuan in 2023. In addition, the marketability of the elevator engineering service business has gradually increased, and revenue reached 0.22 billion yuan in 23 years.

Profitability is stable overall, and the share of revenue from real estate-related businesses has declined. In 2023, the company's revenue grew steadily, and the core net profit increased to 0.45 billion yuan. The main reason was that the company adjusted US dollar bonds through operating cash flow, while the business structure continued to be optimized, and the share of value-added service revenue from developers with strong real estate gradually declined to 10.2%, which is conducive to reducing the adverse impact of the downturn in the real estate market on revenue and profits. At the same time, the company's overall account age structure was good, and the scale of accounts receivable and payable increased healthily.

Investment suggestions: In recent years, Xincheng Yue Service has increased its independence in business development, and its share of business revenue related to real estate has continued to decline; 2) it continues to develop on high-frequency, high-professional, and cross-cycle To-B tracks such as group meal services and equipment and facility management services, and its mature business has a leading edge; 3) deeply cultivate the Yangtze River Delta and achieve high-quality growth through the dual advantages of “group meal+property management”. We expect the company's net profit to be 0.51, 0.523, and 0.562 billion yuan in 2024-2026, respectively, and the current stock price corresponding to PE is 5, 4, and 4 times, respectively. Covered for the first time, giving it a “Recommended” rating.

Risk warning: 1) The risk of increased competition in the industry. 2) The decline in the real estate industry exceeded expectations. 3) The reliance of community value-added services on the foundation of community management. 4) The risk of accounts receivable not being collected in a timely manner. 5) Revenue from value-added services fell short of expectations.