Core views

The company achieved revenue of 1.67 billion yuan in the first half of the year, an increase of 7.8% year on year; achieved net profit of 0.5 billion yuan to mother, an increase of 5.8% year on year, and steady growth in performance. In the first half of the year, the construction area of the company's Xintuo contract construction project was 17.46 million square meters, an increase of 1.1% over the previous year; the construction fee for the Xintuo contract construction project was 4.19 billion yuan, down 18.1% year on year, mainly due to the increase in the share of government construction with lower unilateral construction costs. The company's leading position in the contract construction industry is stable. The market share in the first half of the year based on the newly developed area was 23.8%, an increase of 3.4 percentage points over the full year of 2023. Affected by the decline in real estate sales and pressure on clients' funds, the company's repayment rate has decreased, and the net cash flow from operating activities has declined significantly compared to the same period last year.

occurrences

The company announced its 2024 interim results, and achieved operating income of 1.67 billion yuan in the first half of the year, an increase of 7.8% year on year; net profit to mother of 0.5 billion yuan, an increase of 5.8% year on year.

Brief review

Steady growth in performance. In the first half of the year, the company achieved operating income of 1.67 billion yuan, an increase of 7.8% year on year; net profit to mother was 0.5 billion yuan, an increase of 5.8% year on year. The company's performance grew steadily, and the profit growth rate was less than the revenue growth rate mainly due to: 1) the consolidated gross margin for the first half of the year was 51.5%, down 0.5 percentage points from the same period of the previous year; 2) the credit impairment loss of 40.53 million yuan was calculated in the first half of the year, while the loss of 1.32 million yuan was calculated for the same period last year.

Maintain the leading position of proxy construction, and the market share continues to increase. In the first half of the year, the construction area of the company's Xintuo contract construction project was 17.46 million square meters, up 1.1% year on year; the construction fee for Xintuo's contract construction project was 4.19 billion yuan, down 18.1% year on year, mainly due to the fact that government construction with lower unilateral construction costs accounted for 30.7% of the new development area, an increase of 3.1 percentage points over the same period last year. The company's leading position in the contract construction industry is stable. According to data from the China Index Research Institute, in the first half of the year, the company's new development area steadily ranked first in the industry. The market share calculated based on the new development area was 23.8%, an increase of 3.4 percentage points over the full year of 2023.

Due to the general trend in the industry, repayments have slowed down. Due to the downward trend in real estate sales, the financial side of construction contractors was under pressure, resulting in a decrease in the company's repayment rate. At the end of the first half of the year, the company's receivables (accounts receivables+contract assets plus receivable related party arrears) totaled 2.69 billion yuan, an increase of 23.1% over the end of 2023; the number of receivables turnover days increased from 212 days in 2023 to 263 days in the first half of the year. The company's net operating cash flow in the first half of the year was 77.5 million yuan due to a combination of slow repayments and a high base for the same period last year, which is a significant decrease from the same period last year.

The profit forecast was lowered and the buying rating was maintained. We forecast the company's 2024-2026 EPS to be 0.54/0.59/0.65 yuan (the original forecast was 0.61/0.77/0.95 yuan). The company maintains its leading position in the contract construction industry, its market share continues to increase, and the purchase rating remains unchanged.

Risk analysis

1. Since the second half of 2021, financing channels for housing enterprises have been tightened, and there is excess manpower. Many housing enterprises have chosen to expand and survive through non-debt-free methods such as proxy construction. Currently, more than 60 housing enterprises, including China Resources, Jindi, and Longhu, have entered the construction industry, and most have chosen an asset-light model consistent with Greentown Management Holdings. Increased industry competition may reduce the company's gross margin; 2. As an asset-light company, Greentown Management Holdings requires project managers to control the progress of the entire process of project design, construction, sales, and follow-up properties. High requirements are placed on project managers. Failure to keep up with the pace of talent development may limit the company's order growth. Fierce competition may also cause the company to lose talent, which in turn will slow down the pace of business expansion.