Company profile
Zhengrong Service has provided property management services in China for more than 15 years. According to the data of the Central finger Institute, the company ranked 19th among the top 100 property service enterprises in China in 2020. At present, the company has 149managed projects in 21 cities, covering the Yangtze River Delta, the west coast of the Taiwan Strait, the central and western regions and the Bohai Rim region. The total construction area of the project is about 22.9 million square meters, and the total contracted construction area is about 37 million square meters.
Sino-Thai viewpoint
The industry concentration of the top 100 property management enterprises has increased, and the types of property management in the future seek diversified development: according to the data of the Central finger Academy, the average total construction area of the property management top 100 enterprises has increased from 17.5 million square meters in 2014 to 37.1 million square meters in 2018, with a compound annual growth rate of 20.7%, while the market share of the top 100 enterprises has increased from 16.3% to 38.9%. In terms of total floor area under management, residential properties account for about 74% of the total property management industry. However, the total floor area of non-residential properties managed by the top 100 enterprises has increased by 11.7% from about 1.9 billion square meters in 2017 to 2.13 billion square meters in 2018. The types of managed properties will seek diversified development in the future.
In terms of operating performance: in the fiscal year from 2017 to 2019, the company's operating income was 270 million yuan, 460 million yuan and 720 million yuan respectively, of which the income from property management services accounted for 57.7%, 59.2% and 55.8% respectively, while those from Zhengrong Real Estate Group accounted for 72.8%, 66.4% and 59.0%, respectively. The gross profit margin is 25.8%, 26.5% and 34.1% respectively, which is due to the growth of community value-added services and cost control measures. Labor costs account for about 65.1%, 63.9% and 64.7% of sales costs, respectively. Subcontract costs account for 13.7%, 16.4% and 22.9% of sales costs, respectively The turnover days of third-party trade receivables remained relatively stable, which were 56 days, 56 days and 59 days respectively; the collection rates of property management fees were 91.6%, 92.0% and 92.1% respectively; and the net interest rates were 7.4%, 8.7% and 15.2%, respectively.
Valuation: based on 1 billion shares after the global public offering, the company's market capitalization is HK $36-4.7 billion, which is lower than the average of Hong Kong equities. In 1919, the company's price-to-earnings ratio was about 30.2-39.4 times, and the price-to-book ratio was about 4.19-4.16 times, which was lower than the industry average. Calculated according to the growth rate of income and net profit in 19 years, the company ranks 10th and third among the top 100 property service enterprises respectively. In addition, we counted about 12 property management new shares listed in the past year, and only one overvalued neighborhood broke on the first day. The company brought in four cornerstone investors, including Poly Platinum, and subscribed for $65 million. This time, the stable price is Jianyin International, which has a total of 7 projects in the past year, with a performance of 2 up, 3 down and 2 even on the first day. The company's future strategic positioning of residential and non-residential two-wheel drive can make the income structure more balanced. To sum up, we give it 72 points, rated as "apply for purchase".
Risk hints: (1) market competition risk, (2) industry policy impact, (3) business mainly depends on parent company group relationship.