Reiterate your positive view of the company and the target price of HK $6.70
From a macro point of view, the property management industry entered a policy sweet period during the "14th five-year Plan" period, and the policy catalyst is sufficient; from a meso point of view, the industry competition is becoming more fierce; from a micro point of view, as a second-hand management expert in Jiangsu Province, the company has outstanding management ability and brand influence, has a moat, and is expected to achieve sustained rapid scale and profit growth in the next three years. We reiterate the forecast for the company's managed area and attributable net profit: 1) in 20-23 years, the managed area increased from 39.2 million square meters to 102 million square meters, 3 years CAGR 37.7% CAGR33.1% 2) the attributable net profit increased from 67 million to 158 million yuan, CAGR33.1%. We reiterate the target price of HK $6.70, corresponding to the 22-year PE of 12.5x. The latest closing price is HK $4.67, corresponding to a potential increase of 43.7 per cent relative to the target price of the 22-year PE, of 8.7x.
Continue to plough Jiangsu, brand development is active
We held an investor non-trading roadshow for the company on May 13, which was attended by Mr. Li Chunling, President / Ms. Huang Xuemei, CFO, and Mr. Xu Zan, Director of the Capital Markets Center, to exchange views on corporate strategy, industry competitiveness and other issues of concern to investors. In terms of strategy, the company will continue to implement the regional centralization strategy in the next three years, with the goal of becoming a leading enterprise in Jiangsu, consolidating Nanjing's first market position and ploughing rich cities in the Yangtze River Delta. In terms of enterprise competitiveness, although the industry competition is fierce, the company still shows a strong ability to expand in the regional market. Take the southern Jiangsu region as an example, the performance in the past three years exceeded expectations, and the management area increased from 1 million square meters to 10 million square meters. Recently, the company has achieved a price increase in Wuxi for the first time. In terms of performance, the net increase in managed area in the first quarter was 2 million square meters, equivalent to about 15% of our estimated annual increase in managed area, and the progress of expansion was in line with our expectations. About 80% of the new area in the first quarter came from third-party projects. Newly entered four cities: Nantong, Wuhu, Jining and Xingtai In addition, it is worth noting that the sales of Silver City International (1902 HK), an affiliated real estate company, were very active in April 21, with contract sales up 321% year-on-year to 10 billion yuan and contract sales area up 265% year-on-year to 448000 square meters. The company aims to achieve revenue and CAGR of no less than 35% of the managed area in the next three years, and the management is full of confidence in the company's sustained and steady growth in the medium and long term.
Community value-added and professional services will blossom more.
In terms of value-added services, the company has added a new take-out flag-bearer power exchange service in the past 20 years, with 200 intelligent power stations and 1500 on-grid rider customers, with an average of 2200 power changes per day. We expect the scale of the power exchange service to be significantly expanded in 21 years. In terms of professional services, the company's forward-looking layout, the company has established a comprehensive service qualification and strong expansion ability; at present, the company has four professional service companies: Yincheng Science and Technology, Xianhe Garden, Canze Engineering and Jing'an Security. Among them, 1) Yincheng science and technology management 4000 + elevators, serving 40 non-Silver City enterprises 2) Xianhe Garden has entered the municipal landscaping maintenance service, managing 4.7 million square meters of green area and serving 37 non-Silver City enterprises. We believe that the company's community value-added and professional service layout is forward-looking and has the potential to open up new profit growth space for the company in the medium to long term.
Risk hints: (1) RMB exchange rate fluctuations have intensified; (2) the epidemic has exceeded expectations.