Incident: Greentown Services announced its 2024 interim results. In the first half of '24, the company achieved revenue of 9.068 billion yuan (yoy +10.6%); net profit to mother of 0.505 billion yuan (yoy +21.5%).

Revenue achieved double-digit growth, with steady year-on-year growth in gross profit margin and net margin. The first half of the year achieved revenue of 9.068 billion yuan (yoy +10.6%), core operating profit of 0.893 billion yuan (yoy +25.8%), net profit to mother of 0.505 billion yuan (yoy +21.5%), gross margin of 19.2% (yoy+0.5pct), and net profit margin of 5.8% (yoy+0.5pct). The company's profitability has been steadily improving. Thanks to the company's active external expansion projects, the overall scale was expanded; internal management efficiency was improved, and the management cost ratio decreased by 0.6 pct over the same period last year.

The management area continues to grow, and Xintuo's large-scale revenue generation performance is impressive. In the first half of the year, Xintuo's annual saturated revenue of 0.48 billion square meters (yoy +16.2%) of the company's property management area was 1.57 billion yuan, of which the unowned Xintuo had annual saturated revenue of 0.81 billion yuan. It won bids for 33 projects above the 10 million level, and the delivery area reached 40.298 million square meters. The company cooperated with a total of 224 enterprises and signed 7 new major customers in the first half of the year. The company's project partners are mainly state-owned enterprises, central enterprises and leading enterprises in the industry, and are distributed in Tier 1 and 2 high-energy cities, showing high security and stability, which is conducive to resisting the impact of market fluctuations.

Ample cash repayments are active, and the financial structure is safe and stable. The company's current assets for the first half of the year were 12.37 billion yuan (yoy +2.1%), and cash, cash equivalents and time deposits totaled 4.32 billion yuan, an increase of 0.34 billion yuan over the same period last year. Total lease liabilities were reduced to 1.335 billion yuan (yoy -5.9%), and the repayment rate for the year increased by 1 pct. The company's overall cash is abundant, the repayment rate has increased slightly, and the financial situation is healthy, which can provide basic guarantees for subsequent expansion.

Continuously optimize the business structure and develop multiple business segments collaboratively. The company's property service revenue in the first half of the year was 6.018 billion yuan (yoy +14.6%), accounting for 66.4% of total revenue; park service revenue of 1.758 billion yuan (yoy +6.1%) accounting for 19.4% of total revenue; consulting service revenue of 1.133 billion yuan (yoy +5.3%), accounting for 12.5% of total revenue; and technology service revenue of 0.159 billion yuan (yoy -25.5%), accounting for 1.8% of total revenue. The gross margins of the company's four major service business segments were stable. Among them, the gross margins of property services and consulting services increased by 1.1 pct and 2.0 pct respectively. The company continued to optimize its business structure and develop collaboratively between businesses.

Profit forecasting and valuation. The company's revenue grew doubly, the four major business segments developed collaboratively, and profitability increased steadily. We expect the company to achieve operating income of 19.99, 23, and 26.49 billion yuan in 2024-2026; net profit to mother of 0.73, 0.89, and 1.08 billion yuan, respectively. The corresponding PE is 12.89x, 10.64x, and 8.73x, respectively. It was covered for the first time, and a “recommended” rating was given.

Risk warning: industry competition intensifies; rate control is not effective; business development is slowing down