20240328-招银国际-新希望服务-03658.HK-12__dividend_yield_with_cash_balance_＞_mkt_cap__Maintain_BUY_6页_895kb

New Hope Services (3658 HK) Report Summary

Financial Performance

• New Hope Services reported FY23 earnings with net profit up 6% YoY to RMB215mn and revenue growth of 10.7% to RMB1,261mn, slightly missing expectations due to margin pressures.
• NP margin edged down to 17.1%, GP margin narrowed to 34.9% due to intensifying competition in third-party markets and the exit of non-owner value-added services (segment revenue down 26% YoY).
• Expected future revenue growth of 10-20% and NP growth of 5-10%.

Dividend Update

• Dividend increased to RMB0.16/share, lifting payout ratio to 60% (from 48% in FY22), resulting in a 12% yield and a 6% share price increase post-announcement.
• Company confirmed maintaining payout ratio above 50% going forward.

Operational Highlights

• Regional expansion toward eastern China was efficient, with Basic PM segment revenue contribution rising to 37.9% in FY23 (expected to stabilize at ~40%).
• Catering services achieved 44% revenue growth in FY23 and secured three new contracts worth RMB65mn in 1Q24.

Valuation and Financial Health

• Current price: HK$1.49, trading at 5x 2024E PE.
• Target price: HK$2.79 (up from HK$2.78), reflecting 8x 2024E PE and based on strong cash flow.
• Cash balance stands at RMB1.15bn (surpassing market cap of HK$1.21bn), with robust operating cash generation of RMB335mn in FY23.

Risks

• Potential slower-than-expected expansion in third-party markets.
• Impairment risk from accounts receivable, with high operating leverage impacting margins.