Main points of investment
Maintain the "buy" rating with a target price of HK $14.80: on the basis of ploughing the Dawan area, the company has achieved a breakthrough in scale and region, and actively explored multiple value-added services and professional services. through the high-speed expansion of the endogenous + extension development model, three mergers and acquisitions have been completed in the first half of 2020, and the management has strong executive power. We estimate that the company's operating income from 2020 to 2022 will be 18.7,29.5 and 4.31 billion yuan respectively, an increase of 72.4%, 58.2% and 46.1% respectively over the same period last year, and the net profit will be 2.2,4.0 and 630 million yuan respectively, an increase of 85.5%, 79.7% and 56.1% respectively over the same period last year. The growth rate is much higher than the industry average. We maintain the company's "buy" rating and maintain our target price of HK $14.80, equivalent to 30 times PE in 2021, which is 23.7% higher than the current share price.
The company's core net profit increased by 76% over the same period last year, in line with expectations: the company's operating income in the first half of 2020 was 702 million yuan (the same below), an increase of 54.0% over the same period last year. Property management, non-owner value-added, community value-added and other professional services accounted for 61%, 27%, 6% and 6% respectively; the core net profit of home ownership was 84 million yuan, an increase of 76% over the same period last year, which was in line with expectations.
The target of M & An in the first half of 2020 was exceeded: in the first half of 2020, the company acquired three property management companies, Guangzhou Haoqing, Guangzhou Yaocheng and Shanghai Kejian, with a new contract area of 2197 million square meters. the new management area is 5.75 million square meters (Shanghai Kejian completed the acquisition on June 28, not transferred to the management area), accounting for 51% of the new management area in the first half of the year. M & An enriches the format of the company, makes the company enter the field of industrial logistics, expands the scale of management, and consolidates the company's position in the field of public construction in Dawan area.
Independent outward expansion makes business layout diversified: in the first half of 2020, the company actively explored characteristic professional service areas and added 5 new urban public service projects through independent expansion, with a management area of about 22.28 million square meters. In the first half of 2020, the company's income from other professional services was 40.99 million yuan, an increase of 261% over the same period last year. Among them, intelligent engineering services, municipal sanitation services, elevator services and urban public services accounted for 31%, 25%, 23% and 21%, respectively.
Complete the initial rights issue and have plenty of cash: the company completed its initial rights issue in July 2020, raising US $100 million to enrich the company's cash flow. up to now, the company is expected to have more than 1.6 billion yuan in cash on hand, laying a good capital foundation for the company's business development. At the same time, the placement introduced a number of long-term investors to further optimize the shareholder structure.
Risk tips: business expansion and acquisitions are not as expected; property management fees are blocked; collection rate is not as expected; value-added business development is not as expected.