20220706-招银国际-碧桂园服务-06098.HK-1H22_preview__results_may_beat_but_AR_takes_time_4页_805kb

CG Services (6098 HK) Summary

Core Content

This document is an equity research update on CG Services (6098 HK), issued by CMB International Global Markets. It outlines the company's financial performance and outlook for the first half of 2022 (1H22E), provides detailed segment analysis, and includes financial summaries, key ratios, and valuation insights.

Main Points

1H22E Forecast

• Revenue Growth: Expected to grow by 49% YoY to RMB17.186 billion.
• Net Profit Growth: Expected to grow by 39% YoY to RMB2.931 billion.
• Earnings Per Share (EPS): Forecasted at RMB1.69 for 1H22E, beating the market consensus of RMB1.94.
• Valuation: Currently trading at 16x 2022E PE, below the 1-standard deviation of 25x, and is considered attractive.
• Potential Re-rating: If account receivables (AR) improve in 2H22E and parent company sales strengthen, the valuation may increase further.

Segment Analysis

• Traditional Property Management (PM):

  • Contributes 64% of total revenue.
  • Expected to grow 62% YoY to RMB11 billion.
  • Managed GFA is projected to reach 720 million sqm by June 2022.
  • GP margin is expected to be 30% in 1H22E.

• Commercial Operation:

  • Filling the void in revenue generation.
  • Expected to grow to RMB800 million in 1H22E, up from RMB654 million in 2H21.
  • GP margin is expected to be 50% in 1H22E.

• Community VAS:

  • Expected to rise 11% YoY.
  • GP margin is estimated to remain at 60%.

• Non-owner VAS:

  • Expected to grow 7% YoY.
  • GPM is estimated to stay at 40%.
  • AR remains a challenge, with a large increase in 2021 and expected to stay at RMB15 billion in 1H22E.

• City Services:

  • Expected to grow 15% YoY to RMB2.4 billion.
  • GPM is estimated to be 40%.

Financial Summary

• Revenue: Expected to grow steadily from FY20A to FY24E, reaching RMB86.155 billion in FY24E.
• Net Profit: Projected to grow from RMB2.686 billion in FY20A to RMB10.899 billion in FY24E.
• EPS: Projected to increase from RMB0.98 in FY20A to RMB3.26 in FY24E.
• Gross Margin: Expected to decline slightly from 34.0% in FY20A to 29.3% in FY24E.
• Net Margin: Projected to decrease from 17.2% in FY20A to 12.7% in FY24E.
• ROE: Expected to rise from 18.4% in FY20A to 20.1% in FY24E.
• Current Ratio: Expected to decrease from 1.6 in FY20A to 1.2 in FY22E, with a slight recovery in FY24E to 1.4.
• Receivable Turnover Days: Expected to remain at 197 days in 1H22E.

Valuation and Target Price

• Target Price: HK$47.63.
• Upside Potential: +43.9% from current price (HK$33.10).
• P/E Ratio: Currently at 16x for 2022E, with a declining trend over the 1-year forward period.

Key Information

• Growth Drivers:

  • M&A consolidation (Languang Jusbon, R&F PM, Fantasia).
  • New business in commercial operation.

• Challenges:

  • AR remains high due to challenging macroeconomic conditions for developers.
  • GP margin compression is expected due to the low base in commercial operation.

• Ratings:

  • CMBIGM Rating: BUY.
  • Industry Rating: OUTPERFORM.

• Share Performance:

  • 1-month: +12.8%.
  • 3-month: -13.1%.
  • 6-month: -24.3%.
  • 12-month: -58.2%.

• Shareholding Structure:

  • Chen Chong: 45.1%.
  • JPM: 5.7%.
  • Free float: 48.7%.

• Market Data:

  • Market Cap: HK$111.521 billion.
  • 52-week High/Low: HK$81.85 / HK$22.80.

Analyst Certification

• The analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation.
• No trading or dealing in the stock was done within 30 days prior to the report's release, and no such activity is planned within 3 business days after release.

Important Disclosures

• The report is not investment advice and should not be relied upon for making investment decisions.
• CMBIGM does not assume responsibility for any losses or damages arising from reliance on the report.
• The report is intended for specific recipients and may not be reproduced or distributed without consent.

Conclusion

CG Services is expected to deliver stronger-than-expected 1H22E results due to M&A consolidation and new commercial operations, but AR remains a concern due to the macroeconomic environment. The company is currently undervalued based on its 2022E PE, and a re-rating is anticipated if AR improves in 2H22E. The BUY rating and OUTPERFORM industry outlook suggest a positive outlook for the company's stock.