occurrences
On August 22, 2022, Jianye New Life announced its performance announcement. The company achieved revenue of 1.57 billion yuan in the first half of 2022, an increase of 0.1% over the previous year; realized net profit of 300 million yuan, an increase of 11.3% over the previous year; and a medium-term dividend of HK$0.211 per share.
reviews
Performance fell short of expectations. The company's revenue and profit for 2022 fell short of our expectations, mainly due to the downturn in the real estate industry. Except for the basic property management business, all other business revenue declined. Among them, 1H22 revenue growth rates for community value-added services, non-owner value-added services, lifestyle services, commercial asset management and consulting services were -15.1%, -13.2%, -48.7%, and -9.9%, respectively.
The scale of management is growing steadily, and the basic property management business is highly resistant to cyclicality. As of June 2022, the company's management area and contract area were 142 million square meters and 255 million square meters respectively. Compared with the end of 2021, they increased by 6.25 million square meters and 17.89 million square meters respectively, with corresponding growth rates of 4.6%, respectively. As of June 2022, the company's contract/active management ratio was 1.8 times, and growth in management area is still quite guaranteed in the next few years.
The dividends are generous, with a mid-term dividend ratio of 80%. The company plans to pay a total of $240 million in mid-term dividends, accounting for 80% of the current net profit, equivalent to HK$0.211 per share. According to our estimates, the dividend rate corresponding to the current closing price for the mid-term payout alone is 6.6%, and the corresponding annualized dividend rate is expected to exceed 13% (assuming the total annual payout is twice that of the mid-term). We believe that the mid-term dividend ratio slightly exceeded market expectations, which also reflects that the cash on the company's books is real and has not been misappropriated by related parties.
Sales and management expense rates continue to decline. The sales expense rate and management expense ratio of the company's 1H22 were 1.1% and 6.7%, respectively, down 0.5 pct and 2.6 pct from the same period last year.
Investment advice
Considering that the real estate industry is still in a downward phase, we lowered our profit forecast. We expect the company's net profit to be 687 million yuan, 783 million yuan, and 897 million yuan respectively in 2022-24, with year-on-year growth rates of +11%, +14%, and +15%, down 21%, 31%, and 38% respectively from the previous forecast. We also lowered our target price to HK$5.04 per share (down 28% from the previous target price), corresponding to the 2022-24 PE levels of 8.0x, 7.0x, and 6.1x.
Risk Reminder
Jianye Real Estate sales declined more than expected; expansion fell short of expectations; life service development fell short of expectations