Main points of investment:
Strategic mergers and acquisitions accelerate the expansion of the business territory, with the management area exceeding 40 million square meters: with the merger of Le Life and Ningbo Hongjian in the second half of 2020, the healthy living of the Olympic Garden has not only achieved leapfrog growth, but also has a positive impact on the company in many aspects, such as regional cooperation and complementarity of business formats. By the end of December 2020, the total area under management of the company's property management service division increased by 174.5% year-on-year to about 41.39 million square meters, with a new area of about 26.31 million square meters during the year, of which the new area from third parties increased significantly, accounting for Prida ~ 81.5%. In addition, the company also accelerated business expansion through the above strategic mergers and acquisitions in 2020, and made obvious breakthroughs in the business layout of some key areas. The proportion of managed area in central China, North China and East China increased from 2019 ~ 6.9% and ~ 10.9% to ~ 47.3% and ~ 14.6% respectively, which is conducive to expanding the management radius of the company and laying a solid foundation for the company to strive for more outbound business in the future.
Total income grew by more than 56% year-on-year, and revenue from value-added services doubled: the total income of healthy living in the Olympic Park increased by 56.3% to about 1.408 billion yuan in 2020, up from about 900 million yuan in the same period in 2019. Among them, the income of the property management service division and the commercial operation service division increased by 66.3% and 31.0% to about 1.074 billion yuan and 333 million yuan respectively from about 646 million yuan and 254 million yuan in the same period in 2019. It is worth mentioning that the revenue growth of the company's value-added services in 2020 accelerated significantly under the epidemic, and the revenue increased by ~ 120.8% to about 148 million yuan over the same period last year, which is faster than that in the first half of 2020 (~ 88.6%). It shows that the contribution of M & An and the huge development potential released by the diversified needs of the community continue to be tapped.
The gross profit margin has declined, while the operating profit margin and profit margin have remained stable: the gross profit margin of the Olympic Garden healthy Life dropped from ~ 37.4% in 2019 to ~ 34.2% in 2020. The main reason is that the gross profit margin of property management services in North China, which has been acquired by Lesheng and Ningbo Hongjian, is generally lower than that of the company's comprehensive property management services. On the other hand, the operating profit margin and profit margin of the company in the same period are relatively stable, which are ~ 24.3% and ~ 18.0%, respectively.
Gradually landing and deepening large-scale health industry services: Olympic Park healthy Life will continue to land a number of large-scale health businesses in 2020. During the year, the "property service + pension service" home care brand "Aoyue House" built by the company has been officially put into trial operation in a number of managed communities; in addition, the Qiaonan Street Comprehensive Endowment Service Center in Panyu District, set up under the guidance of various government departments, has also entered the Olympic Garden Health Plaza. As the company will continue to cultivate the big health industry and vigorously develop key businesses such as intelligent health care, comprehensive outpatient service and healthy housing, it is expected that related business will contribute to the company's future performance.
M & A contribution will drive high growth in 2021: looking forward to 2021, in addition to continuing to take over the sold projects delivered by the parent company, China Olympic Garden, the acquired results of Le Life, Ningbo Hongjian and Beijing Boan (January 2021) will also make a full-year contribution, and related factors will drive the company to maintain high growth in 2021.
Profit forecast and investment advice: based on the analysis of the latest business performance of healthy living in the Olympic Park, the profit of the revised company in fiscal year 2021-2023 was about 381 million yuan, 475 million yuan and 572 million yuan respectively, up about 50.8%, 24.4% and 20.5% from the same period last year. According to the discounted cash flow valuation model, we adjusted the company's target price to HK $8.30, corresponding to a price-to-earnings ratio of approximately 13.3,10.7 and 8.9 times for fiscal year 2021, fiscal year 2022 and fiscal year 2023, respectively. The new target price has room for an increase of ~ 65.1% from the closing price of HK $5.03 on April 9, maintaining the company's "buy" rating.