Steady development of core businesses
出处:        时间:2020-01-23
  绿城服务(02869)
  Recurrent earnings expected to grow by 25% YoY in 2019We expect recurrent net profit of Rmb505mn in 2019, up 25% YoY,and reported net profit of Rmb452mn, down 7% YoY, both in line withmarket consensus. We add back share-based payment transactionsexpenses (est. Rmb26mn, Rmb80mn, and Rmb40mn in 2018, 2019,and 2020) and exclude one-off gains and losses when we calculaterecurrent net profit from reported net profit.
  Trends to watch
  Steady GFA growth with deeper penetration in core cities. Weexpect 26% YoY growth in managed GFA in 2019 and 22% growth incontracted GFA (or about 90mn sqm of contracted GFA newly addedin the year). We expect the company to stick to itshigh-tier-city-oriented strategy and to continue to deepen itspenetration in core cities (e.g. est. 9% market share in Hangzhou). Wethink segment GPM in 2019 will stay largely flat with that of 2018.
  Value-added services well on track. We foresee 36% YoY growth incommunity services revenue in 2019, and expect segment GPM toimprove to 28.7% from 25.5% in 2018. Furthermore, we expect anoptimized segment revenue structure, that is, for the proportion ofrevenue from property asset management services, the more cyclicaland less recurrent part, to decrease. We foresee 27% YoY growth insegment revenue for property consulting services and segment GPMof 35% in 2019.
  Expenses burden a little higher. We expect recurrent SG&A (excl.
  s hare-based payment transactions expenses from reported SG&A;est. +37% YoY) to outgrow total revenue (+27% YoY) given thedevelopment of new businesses and constant R&D investment.
  Valuation and recommendation
  We keep our target P/E unchanged (32x 2021e P/E, equivalent to 41x2020e P/E), but lift our target price by 4.6% to HK$10.2, consideringthe adjustment of CICCe exchange rate. Our new target price implies10% upside. Maintain OUTPERFORM rating. The stock is now tradingat 37x/29x 2020e/2021e P/E.
  Risks
  Costs and expenses keep eating into profit.
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