Key points of investment:

Incidents. The company published its 2024 semi-annual report. During the reporting period, the company achieved revenue of 0.518 billion yuan, an increase of 4.01% year on year; net profit attributable to shareholders of listed companies was 0.023 billion yuan, down 72.83% year on year; net cash flow from operating activities was 0.34 billion yuan, an increase of 10.07% year on year;? The company pays a cash dividend of 2.20 yuan (tax included) for every 10 shares to all shareholders.

The increase in revenue in the first half of 2024 was 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 attributable to shareholders of listed companies in the first half of 2024 fell more than in the same period of the previous year. The main reason was that the company's Jin and Daning Financial Intelligence Center project changed the cooperation model in the same period of 2023. The company followed the provisions of the new leasing guidelines and confirmed the lease changes. As a result, the amount of asset disposal proceeds in the same period in 2023 was large, and the current period did not involve similar changes in the cooperation model, which in turn led to a decrease in net profit for the current period compared to the same period of the previous year.

According to the 2024 semi-annual report, the company's business model mainly includes leased operation, shareholding operation, and fiduciary operation. In the first half of 2024, the company leased and operated 40 projects, with a management area of about 0.79 million square meters. The company has been commissioned to operate 29 projects, with a management area of about 0.52 million square meters. The company is involved in the operation of 2 projects, with a management area of about 0.1 million square meters.

As of the end of the reporting period, the company had 71 projects under management, with an area of over 1.4 million square meters. By region, there are 59 projects in Shanghai, 9 in Beijing, 2 in Hangzhou, and 1 in Nanjing.

Investment advice: Benefit from the favorable urban and village policies of megacities, with a “neutral” rating. The company is an asset-light service company. Its main business is the positioning design, renovation, investment, operation and service of old urban properties and inefficient commercial properties.

We expect the company's EPS and BPS to be 0.11 yuan and 2.45 yuan respectively in 2024, taking into account the favorable policies for megacities. According to the statistics bureaus of Shanghai and Beijing, by the end of 2003, the total completed area of office buildings, shopping malls, and other non-residential houses in the two places was about 80 million square meters. The buildings are now over 20 years old, and some of the facilities within the buildings are difficult to meet the needs of modern offices and businesses, and there is an urgent need for renovation and upgrading. Meanwhile, the properties managed by the company are mainly located in the core locations of first-tier cities such as Shanghai and Beijing, which will fully benefit. Furthermore, considering that the company has reconfirmed right-of-use assets and leasing liabilities in accordance with the new leasing standards, it is more appropriate to use PB for valuation. We gave the company a dynamic PB of 1.3-1.6 times in 2024, corresponding to a reasonable value range of 3.19 yuan to 3.92 yuan, giving the company a “neutral” investment rating.

Risk warning: risk of falling occupancy rates and rent differences; risk of excessive regional concentration.