20220429-招银国际-绿城管理控股-09979.HK-1Q22_new_contracts_eased_market_concern_6页_1000kb

Greentown Management (9979 HK) Company Update Summary

Core Content

This document provides an equity research update on Greentown Management (9979 HK), focusing on its performance in the first quarter of 2022, its financials, and the outlook for the company and the broader China Property and Facility Management (PJM) sector. The report highlights the company's improved business development (BD) compared to peers, which helped alleviate market concerns. It also outlines potential risks and valuation metrics.

Main Points

Business Development in 1Q22

• The company's stock price increased by 11% since the initiation report due to improved BD performance.
• New contracts volume in 2022 is expected to be supported by favorable property policies and increased demand from social housing.
• Service fees from new contracts in 1Q22 were RMB2.1bn, a 10% YoY decline, but still better than peers.
• Client visits increased by 17% YoY, but tightened COVID prevention policies caused delays in due diligence and contact negotiations.

Market Conditions

• GFA of land sold in 100 cities declined by 36% YoY, and transaction value of the first batch land supply dropped by 54% YoY, raising concerns about the industry's performance.
• The company's BD performance was much better than the market, which helped ease worries about the sector's outlook.

Revenue and Profit

• Revenue for FY20A to FY24E is projected to grow steadily, with FY22E expected to reach RMB2,767mn.
• Net profit is expected to rise from RMB439mn in FY21A to RMB982mn in FY24E, with EPS increasing from RMB0.26 to RMB0.51.
• Gross profit margin has declined slightly from 47.8% in FY20A to 45.4% in FY22E, but net profit margin has increased from 24.2% to 26.0%.

Key Risks

• Further spread of the pandemic could negatively impact business expansion and project timelines.
• Weaker property market performance may affect revenue and profit growth.

Valuation

• Target price is maintained at HK$8.09, implying a 18x 2022E P/E.
• The company is rated BUY, indicating potential for a 15%+ return over the next 12 months.

Financial Highlights

Revenue

• FY20A: RMB1,813mn
• FY21A: RMB2,243mn (+23.7% YoY)
• FY22E: RMB2,767mn (+23.3% YoY)
• FY23E: RMB3,242mn (+17.2% YoY)
• FY24E: RMB3,722mn (+14.8% YoY)

Net Profit

• FY20A: RMB439mn
• FY21A: RMB565mn (+28.7% YoY)
• FY22E: RMB719mn (+27.2% YoY)
• FY23E: RMB857mn (+19.2% YoY)
• FY24E: RMB982mn (+14.6% YoY)

P/E Ratio

• FY20A: 19.1x
• FY21A: 17.0x
• FY22E: 13.4x
• FY23E: 11.2x
• FY24E: 9.8x

P/B Ratio

• FY20A: 2.7x
• FY21A: 2.9x
• FY22E: 2.7x
• FY23E: 2.4x
• FY24E: 2.2x

ROE

• FY20A: 14.3%
• FY21A: 16.9%
• FY22E: 19.9%
• FY23E: 21.8%
• FY24E: 22.9%

Key Ratios

Shareholding and Performance

Shareholding Structure

• Greentown China Holdings Ltd: 73.17%
• SUPUR Industrial Capital: 2.99%
• LOU GONGWANG: 1.27%

Share Performance

Key Observations

• Capital projects contributed 16% to the 1Q22 estimated service fees, up from 2.8% in FY21.
• Social housing completion target of 2.4 million units in FY22E is expected to boost government project contacts.
• Construction delays affected 5 projects (1.5% of total 334 projects), but recovery is possible if lockdowns last less than a month.
• Sales decline may impact up to 22% of revenue if continued, based on the fee collection mechanism tied to sales progress.

Valuation Table

Analyst Certification

• The research analyst certifies that the views expressed accurately reflect their personal opinions.
• No part of their compensation is tied to the specific views in the report.
• The analyst has not traded in the stock covered in the report within 30 days prior to the report's release and will not trade within 3 business days after.

Important Disclosures

• The report is for informational purposes only and not investment advice.
• Past performance does not guarantee future results.
• The information may be subject to change without notice.
• CMBIGM is not liable for any loss or damage arising from reliance on the report.
• The report is intended for CMBIGM clients and affiliates only.

Conclusion

Greentown Management's improved BD in 1Q22 has positively impacted its stock price and eased market concerns. While service fees from new contracts declined slightly, the company's performance is better than its peers. The company is rated BUY with a target price of HK$8.09, suggesting a 18x 2022E P/E. Key risks include the pandemic's continued impact and weaker property market performance. The company is expected to benefit from favorable property policies and social housing demand, which support its contract volume and revenue growth.