Key points of investment
The first coverage gave a “buy” rating, with a target price of HK$9: Jianye New Life is the largest property service provider in Henan Province. The company relies on Jianye Group, a leading real estate company in the central region, to contribute a stable delivery area, with sufficient capital and obvious brand advantages; the rapid growth of the management area has led to a simultaneous increase in revenue, leading the single-city density industry; revenue from non-basic property management business accounts for more than 60% of total revenue, and has led to an increase in gross margin, and the management expense ratio has been reduced. Focusing on mergers and acquisitions in the Central Plains region, the company actively carries out lifestyle services and asset management services, and continues to extend the boundaries of property management business. We expect the company's revenue for 2020-2022 to be RMB 2,90,41,5.7 billion, respectively, up 64.0%, 43.8% and 38.3%, respectively, and net profit of RMB 4.2, 6.2, and 890 million yuan respectively, up 80.1%, 46.4% and 43.5% year-on-year respectively. The first coverage gave a “buy” rating. The target price was HK$9. The target price corresponds to 22, 15, 11 times PE in 2020-2022.
Deeply cultivated in central China, basic property management grew steadily: Jianye Real Estate's sales capacity continued to improve, and contract sales for the full year of 2019 exceeded the 100 billion mark. Benefiting from the strong business capabilities of related parties and a good reputation in Henan, the company followed the relevant parties to cover 18 prefecture-level cities in Henan Province (including 73 out of 104 county-level cities), laying a firm foundation for continued growth. Currently, the cash in account exceeds 2.7 billion yuan, and there is sufficient strength in mergers and acquisitions.
High project coverage and rapid penetration of value-added services: the company was selected as the 13th of the 2019 Top 100 Property Management Companies. As of 20H1, the average property management fee was 1.78 yuan/square meter/month, and the target year-end collection rate was over 90%. According to third-party data, customer satisfaction remained high at 87.1% in 2019. At present, the company's projects have covered 18 cities in Henan. The average area under management per city has reached 3.17 million square meters, leading industries, and value-added services are rapidly penetrating under the advantage of high single city density.
Expand diversified businesses and accelerate the growth of the non-residential business: in 2016, the company began providing lifestyle services; as of 20H1, Jianye+ registered users exceeded 2.81 million, and the average user expenses were 1,649 yuan, driving high growth in lifestyle services. In 2017, the company began providing asset management services. As of 2019, it operated six Jianye cafeterias, and the asset management business managed a total asset area of 10.93 million square meters. In the future, the company will continue to develop lifestyle services and asset management services to enhance profitability.
Risk warning: business expansion and acquisitions fell short of expectations; property management fee increases were blocked; collection rates fell short of expectations; value-added business expansion fell short of expectations.