JINMAO PROPERTY SERVICES(816.HK)：IMPROVED INDEPENDENCE WITH A RECOVERED CENTRAL SOE AS PARENTCO; UPGRADE TO BUY-格隆汇

机构：招银国际
研究员：Miao ZHANG/Bella LI

　　The company’s earnings were inline with Bloomberg consensus, with NP +18.9% YoY in 1H24 thanks to effective cost control. We think the 2024E target NP growth of >20% is not hard given consolidation of an acquired company, continued cost control and a low base in 2H. We find that the company’s independence has largely improved, and parentco’s risk has largely eased.
　　Considering its strong central SOE heritage amidst intensifying competition in third-party expansion, we upgrade rating from HOLD to BUY , and our TP is at HK$ 4.91, representing 10x 2024E P/E. TP is lowered by 10% as we have adjusted our FX rate applied.
　　1H24 earnings inline thanks to effective cost control. Revenue rose10.2% YoY to RMB1.5bn, supported by a 34.6% YoY increase in Basic PM to RMB1.0bn. VAS to developers fell 20.8% YoY to RMB177mn due to business contraction, and Owner VAS declined 19.6% YoY to RMB305mn due to weak consumer sentiment. Gross profit margin (GPM) contracted 1.8ppt YoY to 24.6%, impacted by VAS to developers, while Basic PM saw a 1.3ppt GPM improvement given higher project density, and Owner VAS GPM increased 3.6ppt to 42.3%, aided by parking space sales. NP growth reached 18.9% YoY, aided by a 4.8ppt YoY reduction in the SG&A ratio to 6.9%.
　　n Guidance unchanged with NP growth >20%. Despite the challenging2H24, management maintained its 2024E guidance, aiming for NP growth of 20%. We believe such growth can be achieved, given: 1) the acquisition of RUNWU JIAYE, expected to be consolidated in 2H, adding approximately 8mn sqm to managed-GFA, which we estimate could contribute about 27% to the full-year total; 2) the continuation of overhead reduction efforts into 2H; and 3) a low base in 2H, requiring only 12% NP growth in 2H24 to meet the target.
　　Independence largely improved. We find that the proportion of managed- GFA from third parties has risen from 33% at the time of listing in 2022 to 50.5% in 1H24. Third-party contribution to contracted-GFA now stands at 54%. The GP contribution from VAS to developers decreased to 15.1% in 1H24 from 36.9% in 2022. Meanwhile, asset impairment risks from the parentco, China Jinmao, have been largely addressed, with it returning to profitability in 1H24. The company anticipates the parentco to deliver c.6mn sqm of managed-GFA for the full year.
　　Upgrade to BUY. Jinmao Property Services was valued lower due to concerns over its weaker organic growth capabilities. Given the aforementioned factors, we now believe the company's independence has largely improved to industry average level. Amidst intensified competition in third-party expansion, its SOE parentco and related party Sinochem will provide stable support to the PM arm. We upgrade our rating to BUY with a TP cut by 10% to HK$ 4.91 (due to FX rate change), representing a 10x 2024E PE. Risks: underperformance in third-party expansion; deterioration in accounts receivable quality.