The company has shown strong determination and ability to develop independently in the past. If the parent company successfully realizes the equity sale, it is expected to further improve the company's ownership structure and enhance the company's independence.
The unique ownership structure of the company provides the possibility for the introduction of new largest shareholders. The largest shareholder of Xuhui Yongsheng service is owned by Xuhui holding Group, with a shareholding ratio of 23.26%, the second largest shareholder is owned by the Lin family, with a shareholding ratio of 20.76%, and the third largest shareholder is the equity incentive platform, which is also held by the family, with a shareholding ratio of 8.79%. According to the announcement of Xuhui Holdings Group, the Group seeks to sell all its shares in Xuhui Yongsheng Services through the bidding process. Once the buyer is identified as the sole subject, the company's largest shareholder will change.
At the same time, due to Lin's shareholding, it is believed that Xuhui Yongsheng service will also maintain the operation and cultural heritage in the future.
We judge that after the introduction of the new largest shareholder, the company is expected to further improve the ownership structure.
The third-party business expansion ability of the company is strong, and the reduction of related party delivery has little impact on the company. By mid-2022, the company's third-party expansion contract area accounted for 92% of the total expansion area, while related parties accounted for only 8%. Regardless of whether it is decoupled from the equity stake in the property company, we expect the annual development volume of Xuhui Holdings Group to decline significantly after the completion of a wave of insurance delivery tasks, as the company will acquire very little land after the fourth quarter of 2021. For stock projects, even if Xuhui holding Group is no longer the company's largest shareholder, the pre-property management service contracts for these projects have often been signed. In fact, if the company decouples from Xuhui holding Group at this stage, it will not significantly affect the contract area and management area that the company can obtain in the future.
The management of the company has the determination and ability to develop independently and is optimistic that the company will have a place in the future market competition. As of the mid-2022 report, executive director Zhou Hongbin held 2.89%. In the first half of the year, directors and management increased their holdings five times and paid an interim dividend of 113 million yuan for the first time. We believe that the management of the company is determined to develop independently. The company has always been an enterprise with relatively steady growth, balanced capacity and rich experience in independent operation among the private property management companies. We believe that the company can further retain a place in the market competition.
If the transaction is completed, the credibility of the company's balance sheet will continue to rise. The market worries that private property management enterprises are occupied by affiliated development enterprises, but if Xuhui Yongsheng service's largest shareholder changes, it is believed that this concern will be greatly resolved. According to the mid-2022 report, the company's trade receivables and other receivables are equivalent to 31 per cent of operating income TTM, of which related party receivables account for 10 per cent of revenue TTM (35 per cent for Jinke Services and 20 per cent for Shimao Services). It can be seen that the company is one of the most independent and most reliable companies in private property management enterprises.
Risk hint: there is uncertainty in the transferee of the shares held by Xuhui holding Group in the future, and there is also uncertainty in the transfer schedule.
Earnings forecast, valuation and rating: the company has shown strong determination and ability to develop independently in the past. If the parent company successfully realizes the equity sale, it is expected to further improve the company's ownership structure and enhance its independence.
We maintain the company's 2022 and 2023 EPS forecast of 0.46, 0.56 and 0.67 per share in 2024. At present, according to the credit of related parties and the scale of operation, the PE valuation of private property management companies is generally 8-15 times in 2022. If this plan is landed, it is expected to improve the company's independence. We will give the company 13 times PE in 2022, corresponding to HK $6.80, maintaining the company's "buy" investment rating.
