The company's recent situation

As the development of the real estate industry shifts from incremental to stock, regulators, residents, and enterprises continue to pay more attention to the management of existing residential assets1. We recently participated in the Wanwuyun Investor Open Day to investigate its benchmark project for micro inventory renovation in Nanjing, Binjiang Aocheng Guanlan Garden, and analyze the sustainable housing asset management model in the era of existing housing from the perspective of enterprises and residents.

reviews

A benchmark for stock residential asset management under the landlord co-governance model. The original developer of Binjiang Aocheng went bankrupt in 2004 due to a liquidity crisis. Although Guanlan Garden completed the “insurance handover building” in 2008, it faced many problems such as equipment equipment and construction quality in public areas. After the project was delivered, the owners dismissed the property company several times until the Industry Committee introduced Vanke Property in 2017. During the service period, Vanke Property fully communicated with the owners and mobilized resources from all parties to carry out continuous transformation of the project. During the comprehensive renovation process, Vanke Property negotiated with the industry committee and all owners, mobilized more than 3 million yuan in public revenue for the project, applied for more than 2 million yuan in maintenance funds and government subsidies, organized crowdfunding by owners of more than 0.1 million yuan, and carried out independent construction and transformation at 30% below the market price. After the transformation, the project environment and owners' quality of life were comprehensively improved. Second-hand housing prices and transaction activity outperformed surrounding comparable neighborhoods; owners' satisfaction increased from 47% in 2019 to 83% in September 2024, the seizure rate increased from 87% in 2019 to 93% in 2023. After considering the revenue from the engineering business and the impact of the Decheng renovation, the project profit margin increased from 0.6% in 2021 to 7.6% in 2023, achieving a win-win situation for owners and enterprises as a whole.

Benchmarking project effects work collaboratively to leverage business growth. The Binjiang Aocheng Project helped Vanke Property Nanjing Industry Committee acquire the project market by hosting salons and other model tours, driving saturated revenue to increase by 12 million yuan and increase business opportunities in the reserve market by 27 million yuan. At the same time, the engineering transformation service model discovered through the project also leveraged more than 28 million yuan of off-balance sheet capital and 8.5 million yuan of joint repair business for the E61 position belonging to the project in 2024, effectively creating new business growth for the company.

Profit forecasting and valuation

Keep profit forecasts unchanged. The company's stock is currently trading at 10.9 times the 2024 price-earnings ratio of 10.9 times the core net profit. The annual dividend yield is 7.3% based on the 55% dividend payout ratio for the second half of the year. We are optimistic about the company's long-term multi-track, all-round competitive strength based on residential, commercial, technology, and urban scenarios, and maintain the industry rating and HK$30.58 target price (corresponding to 14.0 times the 2024 core P/E and 29% upward space).

risks

The development progress of the project fell short of market expectations, and developer-related business dragged down more than market expectations.