Key points of investment
Maintain “buying”, maintain a target price of HK$9.0, take root in Henan, and continue high growth: The company has been rooted in Henan Province for a long time and has more than 20 years of local service experience. Currently, the ratio of residential to non-residential projects has been initially formed at 7:3. It is expected that Jianye Real Estate and Zhongyuan Jianye will continue to provide 15-20 million square meters of volume in the future. The volume of mergers and acquisitions will be no less than 30 million square meters, and the area under management is expected to be no less than 50 million square meters. The CAGR for the next three years will not be less than 40%. The company adheres to a frontline style of play, cuts to local life, gains the trust of citizens through intensity, and provides more home-delivery services. The company's revenue for 2021-2023 is expected to be RMB 39.9, 57.8 and RMB 8.45 billion respectively, up 50.4%, 44.7% and 46.3%, respectively. Net profit attributable to the mother is RMB 605, 847 and RMB 1,183 million respectively, up 41.9%, 39.9% and 39.6%, respectively. Maintain the “buy” rating and maintain the target price of HK$9.0, corresponding to 2021-2023 PE 15, 11, and 8 times, respectively.
Guimu's net profit grew rapidly. The main sources of property management and value-added contributions were: In 2020, the company recorded revenue of 2.65 billion yuan, an increase of 51.3% over the previous year, and Guimu's net profit was 430 million yuan, an increase of 82.3% over the previous year. In 2020, the company made a profit of $0.38 per share and a dividend of HK$0.18 per share, with a payout ratio of 47%. Spin-off revenue, the company's property management services and value-added services, lifestyle services and asset management services accounted for 83%, 14%, and 3% respectively in 2020.
More community activities have been carried out, and gross margins in the three major sectors will remain stable in the future: during the pandemic, the company promoted services such as community group buying, and achieved a 1.5 times increase in GMV, with a repurchase rate of 55%. It is expected that more door-to-door services will be provided in the future. The Builder Platform is expected to be the company's second growth pole, with a compound annual growth rate of no less than 80% in the future. The company expects the gross profit margin of integrated property management to not exceed 20% in the future.
The management area maintained high growth: as of the end of 2020, the company's contract area and management area were 100 million square meters and 186 million square meters respectively. In 2021, Jianye Group is expected to bring in a contract area of 15 to 20 million square meters, and third parties and mergers and acquisitions will provide a contract area of no less than 30 million square meters, achieving a 40% CAGR increase in management area. In terms of mergers and acquisitions, there are currently 20 candidates in the strategic mergers and acquisitions pool, including 15 outside of Henan Province and within 5 provinces. Jianye New Life will achieve strong alliances based mainly on management ability and word of mouth, and consideration of its own project density and profit margin.
Risk warning: Business expansion fell short of expectations; property management satisfaction declined; property management fee collection rate decreased; property management fee price increases were blocked.