20220801-招银国际-绿城管理控股-09979.HK-1H22_results__structure_change_is_the_key_6页_967kb

Greentown Management (9979 HK) Company Update Summary

Core Content

Greentown Management (9979 HK) reported a 33% YoY increase in net profit (NP) to RMB361 million for 1H22. The core net profit, excluding interest income and government grants, rose by 28% YoY to RMB310 million, exceeding expectations by 1.7%. The NP margin improved from 25% in 1H21 to 28.7% in 1H22, driven by gross profit margin (GPM) improvement and a better profit mix.

Key Structural Changes

• Government PJM Contribution to Gross Profit: Increased from 22% at the end of FY21 to 25% in 1H22.
• Commercial Projects: Took up 29% of total contracted GFA in 1H22 compared to 22% in FY21, indicating stronger demand from SOEs and FIs.
• Self-Operated Projects: Rose from 56% to 65% of total revenue, contributing to a 4ppt increase in GPM to 50.4%.

Main Segment Analysis

Commercial PJM

• Revenue: Declined by 1% YoY to RMB765 million.
• GPM: Increased by 4.6ppt to 49.7%.
• Client Structure: FIs and SOEs accounted for 29% of total contracted GFA in 1H22, up from 22% in 2021. POEs' proportion dropped to 40.2% from 42.5%, indicating a shift in client base.

Government PJM

• Revenue: Rose by 74% YoY to RMB381 million due to national affordable housing plans.
• GPM: Declined to 42.2% from 44.7% in 1H21, but gross profit increased by 64% YoY to RMB161 million.
• Growth Potential: Expected to maintain low GP margins due to continued expansion, but diversification into new project types (e.g., industrial parks, old town renovations) offers growth opportunities.

Other Services

• Revenue: Increased by 27% YoY to RMB112.5 million, primarily from a project tendered by the parent company.
• Risk: If the project is completed and no new sources are found, 7.6% of total revenue and >10% of gross profit are at risk.

Financial Highlights

Valuation and Investment Outlook

• Target Price: HK$8.09, representing 18x 2022E P/E.
• Current Price: HK$6.51, with a potential upside of +24.2%.
• CMBIGM Rating: BUY.
• Reasons for Buy Rating:
  1. The company has shown resilience against the property market downturn through structural changes.
  2. It is gaining positive attention for its role in the "housing delivery campaign".
  3. Compared to other options in the broader property market, which are still affected by debt maturity and weak sales, Greentown Management remains a quality choice.

Risks

• Another wave of lockdowns.
• Weaker-than-expected property sales in H22.
• Negative press reports about the parent company.

Shareholding and Performance

• Greentown China Holdings Ltd: 71.28%
• SUPUR Industrial Capital: 2.91%
• LOU GONGWANG: 1.23%

Share Performance (Bloomberg)

Key Ratios

• Gross Profit Margin: 47.8% (FY20A) to 46.8% (FY24E).
• Net Profit Margin: 24.2% (FY20A) to 26.4% (FY24E).
• ROE: 14.3% (FY20A) to 22.9% (FY24E).
• Current Ratio: 0.9 (FY20A) to 0.6 (FY24E).
• Receivable Turnover Days: 78 (FY20A) to 122 (FY24E).
• Payable Turnover Days: 315 (FY20A) to 286 (FY24E).
• Cash/Total Assets (%): 0.5 (FY20A) to 0.4 (FY24E).

Analyst Certification

• The analyst certifies that the views expressed in this report accurately reflect their personal views.
• No part of the analyst's compensation is directly or indirectly related to the specific views expressed.
• The analyst and their associates have not traded in the stocks covered in the report within 30 days prior to its issue and will not trade within 3 business days after issue.

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• HOLD: Stock with potential return of +15% to -10%.
• SELL: Stock with potential loss of over 10%.
• NOT RATED: Stock not rated by CMBIGM.

Important Disclosures

• This report is not investment advice and is intended for informational purposes only.
• CMBIGM may have investment banking relationships with the companies mentioned.
• There may be conflicts of interest affecting the report's objectivity.
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.