Core views

In the first half of the year, the company achieved revenue of 0.52 billion yuan, an increase of 4.0% over the previous year, mainly due to an increase in the rental rate of some new projects and a marginal improvement in the rental rate of stock projects; net profit to mother of 23.22 million yuan, a year-on-year decrease of 72.8%. The sharp decline in performance was mainly due to a project confirming leasing changes in the same period last year, which generated large asset disposal revenue, and there were no such changes in the first half of this year. In the first half of the year, the company developed a new Shanghai Xuhui project. Some small-scale projects did not expire and optimized management costs. At the end of the first half of the year, 71 projects were under management, a decrease of 2 compared to the end of last year. The company's net cash flow from operating activities increased steadily, and announced a semi-annual cash dividend of 2.2 yuan per 10 shares, with a dividend rate of 6.0% calculated at the latest closing price. The characteristics of high dividends are obvious.

occurrences

The company released its 2024 mid-year report, and achieved operating income of 0.52 billion yuan in the first half of the year, an increase of 4.0% year on year; net profit to mother was 23.22 million yuan, a year-on-year decrease of 72.8%.

Brief review

Revenue grew steadily, and profits declined due to declining returns on asset disposal. In the first half of the year, the company achieved revenue of 0.52 billion yuan, an increase of 4.0% over the previous year, mainly due to an increase in the rental rate of some new projects and projects during the climbing period, and a marginal improvement in the rental rate of existing projects. Net profit to mother was 23.22 million yuan in the first half of the year, down 72.8% from the previous year. The sharp decline in performance was mainly due to the fact that the Jin and Daning Financial Intelligence Center project changed the cooperation model during the same period last year. Under the new leasing guidelines, the amount of asset disposal income in the first half of 2023 reached 82.082 million yuan, and the first half of this year did not involve similar changes in the cooperation model. The amount of asset disposal income was 4.673 million yuan.

Develop a new Shanghai project and actively optimize the project portfolio. In the first half of the year, the company Xintuo's “Jinhe Cross-border Tianlin Space” project is located at the core of Xuhui District in Shanghai. The project is close to several companies' current management projects, which can effectively achieve scale effects. While focusing on increasing the occupancy rate of existing projects, the company is also actively restructuring the portfolio of projects under management. As of the end of the first half of the year, the company has 71 projects under management, 2 fewer than the end of 2023, with a management area of more than 1.4 million square meters. The projects are concentrated in the core area of the core city, including 59 in Shanghai, 9 in Beijing, 2 in Hangzhou, and 1 in Nanjing.

Operating cash flow has been growing steadily, and the characteristics of high dividends are obvious. The company's net cash flow from operating activities in the first half of the year was 0.34 billion yuan, up 10.1% year on year; the company announced the 2024 semi-annual dividend plan, with a cash dividend of 2.2 yuan for every 10 shares, with a dividend rate of 6.0% calculated at the latest closing price. The high dividend characteristics are obvious.

The profit forecast was lowered and the buying rating was maintained. We forecast the company's EPS for 2024-2026 to be 0.11/0.11/0.12 yuan, respectively (the original forecast was 0.23/0.26/0.28 yuan). The company focuses on the layout of core cities, has obvious characteristics of high dividends, and maintains the purchase rating unchanged.

Risk analysis

1. The recovery in the domestic commercial market fell short of expectations, affecting the increase in the rental rate and rental income of the company's projects. There is some uncertainty about the overall growth of the domestic economy. Most of the company's tenants are small to medium tenants. If consumption recovery falls short of expectations, the rental rate and rent increase of the company's projects face some uncertainty.

2. New expansion projects may fall short of expectations. The company's new expansion projects may face some uncertainties, causing the progress of construction projects, investment promotion, etc. to fall short of expectations, causing a drag on the company's performance.

3. The speed of project expansion may fall short of expectations and the risk of contract expiration. The company engages in various new projects, and the speed of new development depends on close negotiations between the two parties. Some of the company's projects are facing expiration, and there is uncertainty about renewal.