The core idea of this report is that TEFA Services is a scarce target for GEM Park properties, and has been cooperating with leading customer Huawei for over 20 years. On the basis of daily property management services, the company pioneered operation and maintenance services for HUAWEI CLOUD data center projects. At the same time, a major breakthrough was achieved in the government service business, and a three-year port maintenance service agreement was reached with the Shenzhen Port Office. The company's annual revenue is expected to grow by more than 40%, and the current valuation is underestimated.
The company was founded in 1993 and is a property management company under Tefat Group. Its business includes comprehensive property management services, government services and value-added services. Currently, it has managed nearly 200 projects, with a management area of over 20 million square meters. Major customers include well-known companies such as Huawei, Alibaba, China Mobile, and Tencent.
The company focuses on comprehensive property management services and collaborates to develop government services and value-added services. In 2020, the company achieved revenue of 1.1 billion yuan, an increase of 24.4% over the previous year. Among them, revenue from property management services was 910 million yuan, accounting for 82.7%. Government services and value-added services accounted for 13% and 4%, respectively.
Park properties account for the largest share of integrated property management services. The company's property management service revenue in 2020 was 910 million yuan, a year-on-year growth rate of 24%. Among them, park properties contributed the most, accounting for 85% of revenue.
The market space for property management services in the park is broad.
It is estimated that the total construction area of industrial parks in the country will reach 6.2 billion square meters by 2025. Among them, from an inventory perspective, the total area under management of national and provincial development zones in 2020 was 5.5 billion square meters; from an incremental perspective, it is estimated that the construction area of industrial parks in the country will increase by 140 million square meters each year.
The HUAWEI CLOUD data center operation and maintenance project will generate more than 200 million yuan in revenue for the company's park properties. The company signed a 3-year service contract with Huawei. The service period is from July 1, 2020 to June 30, 2023, and successfully entered the field of data center operation and maintenance.
Government services have become a new profit growth point.
The compound growth rate of government service revenue over the past three years was 42%. The company has a high market share in the Hubei region and provides government services to 7 of the 13 administrative districts under the administration of Wuhan City. The number of government service projects expanded from 37 in 2017 to 125 in 2020, and the service area has expanded from Wuhan to Enshi, Huangshi, and Jingmen in Hubei, Shenzhen, Shantou, Guangdong, Dongying, Qingdao, and Tianjin in Shandong.
The maintenance expenses of the Shenzhen Port Maintenance Service during the initial agreement period were 399 million yuan. The company fully undertook the management of 8 first-line ports and 11 former administrative control line checkpoints in Shenzhen. In 2020, government service revenue was 150 million, and this time, nearly 400 million new businesses brought the company's government services to a new level.
Long-term cooperation projects with high-quality customers are highly replicable.
We've been working with Huawei for over 20 years. The company's top five customers all accounted for more than 50% of revenue in 2017-2020. The company's core competitiveness was outstanding, and it received many awards recognized by core customers.
The company has formulated three service standards to help the business quickly replicate and expand. Relying on the high-tech park service experience accumulated over many years of serving the Huawei base, the company has formulated three unified service standards and management systems for park, commercial, and residential categories.
Investment advice: We expect the company's revenue for 2021-2023 to be 1,67, 18.3, and 2.11 billion yuan respectively, with a compound annual growth rate of 24%; the net profit of the mother is 130, 140, and 170 million yuan respectively, with a compound annual growth rate of 19%; earnings per share are 0.99, 1.12, and 1.28 yuan respectively, compared to the current stock price PE of 27.3, 24.14 and 21.01 times. The FCFF valuation estimates a reasonable share price of $35.92 per share. First coverage, giving “buying”
ratings.
Risk warning: Business expansion falls short of expectations, risk reduction of property management fees, risk of recurrent epidemics.