Main points of investment:
Events. The company publishes its 2020 annual report. During the reporting period, the company realized 1730.1 million yuan in main business income, an increase of about 37.1 percent over the same period last year, and the company realized a net profit of 222.0 million yuan, an increase of about 35.4 percent over the same period last year. The final dividend recommended by the Board for 2020 is HK69.0 cents per share.
In 2020, the company's revenue came from three main businesses: (I) property management services; (ii) pre-delivery and consulting services; (iii) community value-added services; and (iv) smart solution services. During the year, (I) property management service revenue reached 793.8 million yuan, accounting for 45.9% of the company's revenue, an increase of 41.9% over the same period last year; (ii) pre-delivery and consultancy services revenue reached 623.3 million yuan, accounting for 36.0% of the company's revenue, an increase of 33.3% over the same period last year; (iii) community value-added services revenue reached 135.3 million yuan, accounting for 7.80% of the company's revenue, an increase of 11.4% over the same period last year And (iv) Smart solution service revenue reached 177.8 million yuan, accounting for 10.3% of the company's revenue, an increase of 56.8% over the same period last year.
According to the 2020 annual report, by the end of 2020, the construction area of the company's property management services was 57.5 million square meters, an increase of about 24.4% over the same period last year. The number of projects under management reached 435, covering 51 cities in 15 provinces, municipalities and autonomous regions. In 2020, in order to expand the business scale and market share of property management services in the Yangtze River Delta region of China, the company acquired 60% of Ningbo Langtong property Service Co., Ltd. and 60% of Zhejiang Ruiyuan property Management Co., Ltd. The company and Handan Fengfeng mining area set up an integrated service platform, signed the overall strategic cooperation and introduced the urban omni-directional integrated service business, and further realized the transformation and upgrading of the urban omni-directional integrated service.
In 2020, the construction area of the properties developed by independent third-party property developers was about 28.7 million square meters, an increase of about 33.5 percent from about 21.5 million square meters in 2019. In terms of pre-delivery and consulting business, the number of projects served by independent third parties has increased steadily, from 55 in 2019 to 78 in 2020. The increment of the company's intelligent third-party business is about 55.1 million yuan, and the increment of intelligent product sales business is about 10.7 million yuan.
Investment advice: the country's leading supplier of integrated property management services, maintaining a "better than the market" rating. The company specializes in providing comprehensive urban integrated services for middle and high-end properties, and focuses on metropolitan areas with high economic development vitality supported by national macro strategic policies. We estimate that the EPS of the company from 2021 to 2023 is 1.88,2.54,3.18 yuan respectively. With reference to the valuation of similar comparable companies, the company is given a dynamic price-to-earnings ratio of 20-25 times in 2021, with a reasonable value range of HK $44.85-56.07 (RMB37.6-47.07m, the midpoint of the Hong Kong dollar exchange rate is RMB 0.83826 / HK $) and rated as "better than the market".
Risk hint. The risk of rising labor cost; the risk of excessive concentration in the region; the risk of value-added business expansion is not as expected.