20230321-招银国际-绿城管理控股-09979.HK-Earnings_beat_with_double_surprises_on_dividend_payout__Maintain_Buy_6页_1mb

Greentown Management (9979 HK) Company Update Summary

Core Content

Greentown Management (9979 HK) reported a +32% YoY earnings growth in 2022, slightly exceeding market expectations. This performance was driven by a special dividend of HK$0.9 per share, which increased the 2022 payout ratio to 100%, and an increase in the future payout ratio to 80% from the original 60% guidance. The company's share price rose 3% against the HSI's -3% movement, indicating strong investor confidence.

Main Points

• Earnings Performance:

  • NP growth of +32% YoY in 2022, 0.2% above expectations.
  • Gross Profit Margin (GPM) improved by 6ppt to 52% due to reduced staff costs and slower growth in service & outsourcing costs.
  • Commercial PJM GPM rose by 9ppt to 54%, attributed to increased self-operated projects and the inclusion of Capital PJM.

• Business Structure and Revenue:

  • Revenue of RMB 2.7bn (+18.4% YoY) missed estimates by 7.8%, primarily due to a decline in business from SMDs outpacing growth from FIs/LGFVs.
  • Commercial PJM revenue accounted for 63% of total revenue in 2022, down from 66% in 2021.
  • Government PJM reached 29% of total revenue, close to the company's 30% target.
  • Capital PJM, included in Commercial PJM, is expected to contribute 20% in the future and reached 11.7% of total new contract value in 2022.

• Dividend and Payout Ratio:

  • Special dividend of HK$0.9/share raised 2022 payout ratio to 100%, yielding 5.9%.
  • Future payout ratio lifted to 80%, up from 60%.

• Investment Recommendation:

  • Maintain Buy rating.
  • Target Price lifted 9% to HK$9.39, reflecting 18x 2023E P/E.
  • Factors supporting the recommendation: leading market share (25.5%), strong cash flow, asset-light model, and high dividend yield.

Key Information

• Market Share: 25.5% in 2022, up from 22.4% in 2021.

• Shareholding Structure:

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

• Stock Performance:

  • 1-month: +4.5% (Absolute), +10.9% (Relative)
  • 3-months: +16.0% (Absolute), +15.0% (Relative)
  • 6-months: +2.8% (Absolute), -2.2% (Relative)

• Financial Highlights:

  • Revenue Growth: Expected to grow at 26-27% YoY in 2023-25E.
  • Net Profit Growth: Estimated at 27-28% YoY in 2023-25E.
  • P/E Ratio: 18x for 2023E.
  • Dividend Yield: Expected to reach 7.4% in 2024E and 9.2% in 2025E.
  • ROE: Projected to reach 38.8% in 2025E.

• Valuation Table:

  • Target Price (TP): HK$9.39 (up 9% from previous TP of HK$8.60).
  • Current Price: HK$7.25.
  • Price Target %: +29.5% upside.

Earnings Revision

• Revenue Estimates lifted by 4-10% for 2023-24E.
• GPM is expected to stabilize at ~50%.
• NP Estimates increased by 9-13% in 2023-24E due to improved margins.

Financial Summary

Income Statement (RMB mn)

• Revenue: RMB 2,243 (FY21A), RMB 2,656 (FY22A), projected to RMB 3,372 (FY23E), RMB 4,294 (FY24E), RMB 5,465 (FY25E).
• Net Profit: RMB 565 (FY21A), RMB 745 (FY22A), projected to RMB 935 (FY23E), RMB 1,174 (FY24E), RMB 1,461 (FY25E).
• EPS: RMB 0.29 (FY21A), RMB 0.38 (FY22A), projected to RMB 0.48 (FY23E), RMB 0.61 (FY24E), RMB 0.75 (FY25E).

Cash Flow Summary

• Net cash from operating: RMB 566 (FY21A), RMB 714 (FY22A), projected to RMB 686 (FY23E), RMB 1,044 (FY24E), RMB 1,325 (FY25E).
• Capex: RMB 21 (FY21A), RMB 39 (FY22A), projected to RMB 46 (FY23E), RMB 56 (FY24E), RMB 67 (FY25E).
• Net cash from financing: RMB -322 (FY21A), RMB -769 (FY22A), projected to RMB -755 (FY23E), RMB -946 (FY24E), RMB -1,176 (FY25E).

Balance Sheet (RMB mn)

• Total assets: RMB 5,244 (FY21A), RMB 6,161 (FY22A), projected to RMB 6,190 (FY23E), RMB 6,982 (FY24E), RMB 7,981 (FY25E).
• Total liabilities: RMB 1,872 (FY21A), RMB 2,288 (FY22A), projected to RMB 2,702 (FY23E), RMB 3,325 (FY24E), RMB 4,110 (FY25E).
• Equity to shareholders: RMB 3,341 (FY21A), RMB 3,739 (FY22A), projected to RMB 3,364 (FY23E), RMB 3,541 (FY24E), RMB 3,765 (FY25E).

Key Ratios

• Gross Profit Margin: 46.4% (FY21A), 52.3% (FY22A), projected to 50.1% (FY23E), 49.9% (FY24E), 49.8% (FY25E).
• Net Profit Margin: 25.2% (FY21A), 28.0% (FY22A), projected to 27.7% (FY23E), 27.3% (FY24E), 26.7% (FY25E).
• ROE: 16.9% (FY21A), 19.9% (FY22A), projected to 27.8% (FY23E), 33.1% (FY24E), 38.8% (FY25E).
• Current Ratio: 0.8 (FY21A), 1.1 (FY22A), projected to 0.8 (FY23E), 0.6 (FY24E), 0.5 (FY25E).

Conclusion

Greentown Management's strong earnings growth, improved margins, and increased dividend payout ratio support the Buy rating. Despite revenue missing expectations, the company's leading market share, good target completion records, and asset-light model contribute to its favorable outlook. The target price of HK$9.39 reflects a 18x 2023E P/E and a +29.5% upside from the current price of HK$7.25. The company is expected to maintain strong performance with continued growth in key segments and a favorable competitive landscape.