24H1 revenue +11% YoY, net profit to mother +21.5% YoY, exceeding market expectations. 2024H1, the company achieved revenue of 9.07 billion yuan, +10.6% year on year; core operating profit of 0.89 billion yuan, +25.8%; realized net profit of 0.5 billion yuan, +21.5% year over year, exceeding market expectations; basic earnings per share were 0.16 yuan, +23% year over year; gross margin and net profit margin were 19.2% and 5.6%, +0.5 pct year on year; sales and marketing expenses of 0.16 billion yuan, +10.1 year on year %, sales expense ratio 1.8%, -0.1 pct year on year; administrative expenses of 0.69 billion yuan, +2.5% year over year, lower than revenue growth rate of 10.6%, management expenses rate of 7.6%, -0.6 pct year on year; financial expenses ratio -0.15%, -0.3 pct year on year; total cost rate of the three items was 9.2%, -1.0 pct year on year. Trade and other receivables lost $0.14 billion, +24.4% year over year; cash and cash equivalents+term deposits were $4.31 billion, up 0.3 billion yuan year over year. Changes in performance are mainly due to: 1) steady increase in management scale; 2) gross margin has been repaired and management rates have been optimized.

The 24H1 tube area ratio was +16%, and the third party accounted for 82% of the tube area. At the end of 2024H1, the company's managed area reached 0.48 billion square meters, +16.2%; the reserve area reached 0.36 billion square meters, -5.7%; the reserve/management coverage ratio was about 0.7 times; Xintuo's annual saturated revenue was 1.57 billion yuan, +3% year over year, of which non-residential accounts for 52%. At the end of 2024H1, residential and non-residential areas accounted for 79% and 21% respectively; 2) Greentown real estate and third parties accounted for 18.2% and 81.8% respectively; 3) East China/Bohai Rim /Pearl River Delta/other regions accounted for 59.6%/15.7%/8.4%/16.3% respectively.

Property service revenue +15% year-on-year, park service revenue +6% year-on-year, and gross margin increased. 2024H1, the company's property services, park services, consulting services, and technology services achieved revenue of 60.2, 1.76, 1.13, and 0.16 billion yuan, respectively, +14.6%, +6.1%, +5.3%, and -25.5%, respectively, accounting for 66%, 19%, 13%, and 2%, respectively. The gross margins were 14.9%, 23.9%, 32.1%, and 38.7%, respectively, compared with +1.1, -0.4, +2.0, and +2.1pct. In consulting services, construction services and management consulting services were +5.2% and +5.9%, respectively, accounting for 88% and 12% of consulting service revenue; in park services, park products and services, home living services, park space services, property asset management services, and cultural and education services revenue were +11.4%, +21.1%, +6.1%, -13.3%, and +9.1%, respectively, accounting for 36.6%, 15.2%, 8.7%, 18.7%, and 20.8% of park service revenue. The company's overall gross margin has increased, stemming from measures to improve quality and efficiency, and continuously strengthen cost control.

Investment analysis opinion: High performance increase, profit margin repair, cost rate improvement, maintenance of the “buy” rating. Greentown Services achieved stable and continuous expansion through third-party expansion. The company is known for its service quality. The region focuses on the Yangtze River Delta. The collection rate, renewal rate, and bid winning rate are all at a high level in the industry, and the ability to raise property fees is relatively strong, medium- to long-term profit margins are more stable, and it is expected to take the lead in exploring value-added service space in the later stages of the industry, and is expected to lead the gold track of the property management industry. We maintain the company's 2024-26 earnings forecast to 0.22, 0.25, and 0.28 yuan. Considering that Greentown Services is a third-party quality property management company, it is expected that it will benefit from the optimization of the real estate and property management pattern in the future, profit margins are expected to gradually improve, and maintain a “buy” rating.

Risk warning: The expansion of value-added services fell short of expectations, labor costs rose beyond expectations, and profit margins declined. There is still uncertainty about lawsuits involved.