performance
On August 28, 2023, the company announced results: revenue of 2.46 billion yuan in the middle of 2023, -3.9% year-on-year; realized net profit of 190 million yuan, or -47% of the same period.
Management analysis
Performance fell short of expectations. The company's revenue for the first half of 2023 fell short of our previous expectations, mainly because: ① In order to ensure the quality of repayment, the company actively controlled transactions with Jinke Real Estate. 1H23 non-owners' value-added service revenue fell 68.6% year-on-year, and the decline exceeded expectations.
② Due to the termination of some self-operated businesses and the continuous transformation of some businesses from self-operated to platforms, 1H23 community value-added service revenue fell 43.9% year-on-year. ③ Local lifestyle services have shrunk their supply chain business, and 1H23 revenue was +10.5% year-on-year, lower than our previous forecast. The year-on-year decline in net profit for 1H23 was greater than revenue, mainly because: 01H23's overall gross margin fell 3.6ppt to 22.9%; ② 1H23's management expense ratio increased by 3.1 ppt to 11.1%; ③ net impairment loss of financial assets +97% year-on-year.
The quality of property management continues to improve, the scale has increased slightly, and the unit price has increased. ① As of 1H23, the company's management area was 265 million square meters (of which third parties accounted for 56.9% and the southwest core region accounted for 51.6%), a net increase of 10.91 million square meters compared to the end of last year; the contract area was 362 million square meters (of which third parties accounted for 64.1%), a slight increase of 2.4 million square meters compared to the end of last year. ② As of 1H23, the company's average property management fee was 2.21 yuan/square meter* month, an increase of 0.01 yuan compared to 2022.
Among them, the average property management fee for third-party projects was 2.01 yuan/square meter* month, an increase of 0.08 yuan compared to 2022.
Local lifestyle services have been restructured, and food services are growing rapidly. In the 1H23 local lifestyle service business, the company has shrunk its supply chain business with low gross margin, increased its food service, and ushered in rapid growth. 1H23 food service revenue reached 159 million yuan, +287.7% year-on-year. In addition, with the resumption of tourism, 1H23's hotel management business also achieved revenue of 75.5 million yuan, +15.9% over the same period last year.
Profit Forecasts, Valuations, and Ratings
According to the company's latest business structure and gross margin, we lowered our net profit for 2023-25 to 424 million yuan, 485 million yuan, and 546 million yuan (down 17%, 20%, and 24% from previous forecasts). The year-on-year growth rates for 2024-25 were +14.4% and +12.7%, respectively. Considering that the company's receivables and impairment last year were sufficient, this year, as various business adjustments are in place, we will return to a steady growth trend. We maintain our “buy” rating. The company's current stock price corresponds to the 2023-25 PE of 16.8x, 14.7x, and 13.0x.
Risk warning
The development of the group meal business fell short of expectations; economic recovery fell short of expectations; expansion fell short of expectations.