20230829-招银国际-万物云-02602.HK-11H23_earnings_missed._Is_bidding_with_capital_injection_an_unhealthy_strategy__9页_1mb

Company Update and Financial Performance

Onewo (2602 HK) announced its 1H23 earnings missed market expectations with a 20.5% YoY EBITDA growth, but revenue growth was weak at 12.5% YoY, driven by the slowing property market. The company declared an interim dividend for the first time post-IPO, with a payout ratio of 20% based on EBITDA. We maintain a BUY rating.

Strategic Analysis

The Onewo Town strategy is showing positive results, with 102 towns renovated, improving gross profit by RMB104mn in 1H23. GP margin increased to 15.1%, and community VAS revenue grew 22% YoY with a 36.5% margin. The bidding strategy involving capital injection is viewed positively as it funds Onewo Town development without shifting asset risks, providing cost advantages and enabling expansion.

Valuation and Recommendations

We maintain BUY with a target price of HK$44.11, up 51.6% from current price. Key metrics include a P/E ratio of 14x and P/B ratio of 2.7x. The company is favored for its competitiveness, low parent company dependency, and improved dividend.

Earnings and Financial Forecasts

Earnings for FY23E-FY25E are revised downward due to intensifying competition and weak demand, with projected revenue growth slowing from 18.9% to 17.3% YoY. Financial forecasts show steady EBITDA growth but lower net profit margins, reflecting market headwinds.

Outlook

Despite earnings misses, the Onewo Town strategy is expected to drive long-term value, with profitability metrics improving. Risk factors include property market volatility and competitive pressures.