Main points of investment
The 2020 results were in line with expectations: the company's 2020 operating income was 1.52 billion yuan, up 34.9% over the same period last year; gross profit was 640 million yuan, up 52.1% over the same period last year; and core net profit was 350 million yuan, up 86.4% over the same period last year.
The company's comprehensive gross profit margin was 42.1%, an increase of 4.8 percentage points over the previous year; the core net profit rate was 23.1%, an increase of 6.4 percentage points over the previous year; and the final dividend per share was 6%, with a dividend payout rate of 35% of the core net profit. The company's annual performance was in line with expectations.
Profit margins have improved significantly: residential property management services and non-residential property management and commercial operation services account for 70% and 30% of the company's revenue, respectively, and gross margins account for 59.5% and 40.5%, respectively. Among them, the gross profit margin of non-residential property management and business operation services improved significantly, up 13.5 percentage points from the same period last year to 56.9%. The main factor was the proportion of revenue from business operations and other value-added services and the increase in gross profit margin. Considering that the acquisition and integration process still takes time, but with the digital transformation and upgrading of the company, the increase in the penetration of cross-industry value-added services and the development of the light asset export business of commercial operations, we expect the company's comprehensive gross profit margin to remain stable.
The expansion of property management scale is accelerated, and the growth of commercial operations is strong: at the beginning of 2021, the company achieved great-leap-forward growth through acquisitions, and the area under management reached 127 million square meters after the acquisition of cedar, an increase of 205.5 per cent compared with the end of 2020. The company has a strong ability to execute mergers and acquisitions, relying on the outward expansion ability of cedar and the sufficient land reserves of Hejing Pacific, we expect the company's managed area to exceed 200 million square meters in 2021, an increase of 381.1% over the end of 2020. At the same time, the growth of the company's commercial operation business is strong. By the end of 2020, the company provided commercial operation services for 17 projects. Hejing Pacific will open 26 shopping malls and 9 office buildings one after another in the next 1-3 years, and the company is expected to land five projects a year through light asset exports.
Maintain the buy rating with a target price of HK $11.80: we expect the company's operating income to be 38.3 and 6.58 billion yuan, respectively, up 152.5% and 71.8% year-on-year, and its core net profit to be 7.0 yuan and 1.24 billion yuan, respectively, up 98.8% and 77.2% respectively. We believe that with the strong execution of the company's development team and sufficient land reserves, the size of the company is expected to maintain rapid growth. In addition, relying on the diversified industrial layout of Hejing Pacific, the company has great potential for value-added business. Maintain the "buy" of the company
The rating, with a target price of HK $11.80, corresponds to 2021 PE, which is 16 times that of 2022.
Risk tips: business expansion and acquisitions are not as expected; commercial project operations are not as expected; collection rates and occupancy rates are not as expected; value-added business expansion is not as expected.
