Steady operation, high-quality growth in performance. In the first half of 2024, the company achieved operating income of 7.87 billion yuan, +10.2% year on year; net profit to mother of 0.85 billion yuan, +10.8% year over year; gross margin of 20.5%, down 0.71 percentage points from the same period in '23; and net profit margin of 10.9%, the same as in the same period in '23. The company's 1H2024 management expense ratio decreased by 1 percentage point to 6.2% compared to the same period in '23. By business segment, in the first half of 2024, the company's property management services, non-landlord value-added services, and community value-added services contributed 5.593 billion yuan, 1.028 billion yuan, and 1.25 billion yuan respectively, to revenue of +16.1%, -2.1%, and -1.8%, respectively.

Focus on quality development, and the unit price of property management costs has been steadily increasing. As of the end of 2024, the company's contract area and management area were about 949.9 million square meters and 756.8 million square meters respectively. Of these, 36.8% of the contract area came from parent company Poly Development, which continues to deliver high-quality and stable business to the company. On the other hand, market-based expansion has injected strong momentum into the company's performance growth. In the first half of 2024, the company's contract amount for Xintuo's third-party projects was about RMB 1,200.2 million. In terms of optimizing the quality of expansion, the company focused on deep-developing the four core economic zones of the Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta, and central urban agglomeration, accounting for 77.0% of the annual contract amount of Xintuo third-party projects, +10.5 percentage points over the previous year; the second was to increase large-scale project expansion, which obtained 35 projects with a single-year contract value of Xintuo third party during the period, accounting for about 64.3% of the annual contract amount for new development third party projects, an increase of about 5.7 percentage points over the previous year. Benefiting from the increase in pricing standards for new projects and price increases for some projects under management, the company's average property management fee unit price increased steadily, increasing by 0.04 yuan to 2.33 yuan over the same period in 2023.

Leading the “era of big logistics”, based on the service benchmark of state-owned commercial offices. July 2024. Poly Property held the industry's first state-owned service forum in Beijing and released a new “super fast charging” service model. On the basis of the original commercial property service, more emphasis is placed on the support of productive services, providing enterprises with continuity guarantees for the entire production, operation, office, and life chain by embedding multiple production and living spaces to help customers better focus on their main business and achieve comprehensive support for customer development with high-quality state-owned services. At the same time, the company is actively developing customers in high-end manufacturing and strategic emerging industries, serving leading customer projects in industries such as the JD Beijing Headquarters Building, Haier Group Qingdao Factory Park, Guanglianda Guangzhou Digital Technology Building, and Jinshan Group's Wuhan headquarters office area, and accelerating the IFM integrated facility equipment service layout. In the first half of '24, the company's annual contract amount for new third-party commercial and office projects reached approximately RMB 429.6 million, an increase of about 27.0% over the previous year.

Investment advice: Maintain an “better than the market” rating. Considering the balanced development of the company's various business segments and stable incremental business delivery by the parent company, we gave the company a 2024 EPS valuation of RMB 2.81, a 10-12 times PE valuation. The corresponding market value range was HK$17-20.4 billion, and the corresponding reasonable value range was HK$30.72-3 6.86 per share. (Not specified in this article; all prices are in RMB, 1 HKD = 0.92 RMB).

Risk warning: 1) The growth rate of the total number of new homes in the real estate industry is at risk of shrinking; 2) Market recovery falls short of expectations.