occurrences

On August 19, 2024, the company announced the 2024 interim results announcement.

Key points of investment

Revenue and profit increased year-on-year. The gross margin of community value-added services increased 2024H1's revenue by 7.871 billion yuan, up 10.2% year on year; net profit to mother was 0.846 billion yuan, up 10.8% year on year; gross margin was 20.5%, down 0.71 pct year on year; net interest rate was 10.9%, the same year on year; and management rate was 6.2%, down 1 pct year on year. By business, 2024H1's property management service revenue was 5.59 billion yuan, up 16.1% year on year, accounting for about 71% of total revenue; gross profit margin was 16.79%, down 0.24 pct year on year. Revenue from value-added services for non-owners was 1.03 billion yuan, down 2.1% year on year, accounting for about 13.1% of total revenue, gross profit margin of 18.05%, down 1.53 pct year on year; community value-added service revenue was 1.25 billion yuan, down 1.8% year on year, accounting for about 15.9% of total revenue, gross profit ratio of 38.85%, up 0.73 pct year on year.

The unit price of property fees has increased, and the share of new development projects has increased

In terms of management scale, as of the end of June 2024, the company's contract management area was 0.95 billion square meters, of which the third party contract management area was 0.6 billion square meters, accounting for 63.2%; the area under management was 0.757 billion square meters, and the third party managed area reached 0.491 billion square meters, accounting for 64.9%; achieving revenue from third party property management of 2.318 billion yuan, an increase of 17.7% over the previous year, accounting for about 41.4% of total property management revenue. Among them, commercial and office buildings have managed an area of 0.036 billion square meters, with revenue of 0.88 billion yuan, an increase of 16.8% over the previous year; public services have managed an area of 0.422 billion square meters, and property management revenue of 1.44 billion yuan, an increase of 17.2% over the previous year, and the non-residential sector accounts for 60.5% of the area managed. The unit price of the residential community property fee was 2.33 yuan/square meter/month, an increase of 0.04 yuan/square meter/month over the previous year. Judging from the Xintuo situation, the contract amount for 2024H1's Xintuo third-party projects was 1.2 billion yuan, a year-on-year decrease of 13.6%. Among them, the four core economic zones of the Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta and central urban agglomeration accounted for 77%, an increase of 10.5 pcts over the previous year; there were 35 projects with a single-year contract amount exceeding 10 million yuan, accounting for 64.3%, an increase of 5.7 pcts over the previous year. In addition, Xintuo's commercial and office contracts amounted to $0.43 billion, an increase of 27% over the previous year.

Poly Development is the top 1 in the sales scale industry. It provides a foundation for growth in the long term. 2024H1 Poly Development's sales amount is 173.3 billion yuan, and it has remained the top 1 sales in the real estate industry. As of the end of June, the company's contract management area from Poly Development was about 0.35 billion square meters, accounting for 36.8% of the total management area. Although the real estate industry is currently still at the bottom of its foundation, we believe that Poly Development has solid fundamentals and a central enterprise background, has the advantage of being the “leftover” king over a long period of time, and that increasing the real estate industry policy to stabilize real estate within 2024 is a probable event. As a leading housing enterprise, Poly Development is expected to take the lead in benefiting from fundamental restoration brought about by strong policies. In the long term, with the steady recovery of the real estate industry, Poly Development can provide a solid foundation for the growth of the company's management area.

Investment advice

We believe that the company's operation is steady, the results of improving quality and efficiency were shown in the first half of the year. The unit price of property fees was raised, management rates were reduced, and the controlling shareholder Poly Development remained in the top 1 in the industry. It is rich in resources, which can provide sufficient support for the company's development, and the increase in management scale is strong. Furthermore, the company continues to grow in the core economic zone and non-residential business management scale, and has performed well in third-party market expansion competition. We expect the company's 24-26 EPS to be 2.84 yuan, 3.20 yuan, and 3.52 yuan per share, maintaining a “buy” rating.

Risk warning

Sales support from related housing enterprises fell short of expectations, and competition for market expansion intensified.