\u3000\u3000 China Merchants Property Operation & Service Co.Ltd(001914) (001914)
Core view
On January 27, 2022, the company announced that it planned to transfer 100% equity of three wholly-owned subsidiaries directly and indirectly held by AVIC city investment, Kunshan AVIC and Ganzhou Jiufang to the subsidiaries of the company’s controlling shareholder China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) for a total consideration of RMB 777586000.
Initial divestiture of heavy assets and continuous optimization of asset structure. The company plans to divest three subordinate enterprises, whose main assets are holding properties. As of August 31, 2021, AVIC city’s assets mainly include parking spaces and hotels, with a net asset of 230000 yuan and a transaction consideration of 4.07 million yuan. Kunshan AVIC’s assets include commerce and hotels, with a net asset of 334.73 million yuan and a transaction consideration of 335.5 million yuan. Ganzhou AVIC nine party assets include shopping malls, with a net asset of 437.7 million yuan, The transaction consideration is 438.01 million yuan, and the goodwill risk is expected to be small after the completion of the transaction. This shows that the initial implementation of the separation of light and heavy assets of the company is conducive to optimizing the asset structure and improving the balance sheet.
Previously, mergers and acquisitions continued to land, and non residential properties maintained a leading position. Previously, the company announced the acquisition of 100% equity of Shanghai Airlines property, 95% equity of China Southern Airlines property and 65% equity of Shenzhen Huiqin property, continuing to maintain its dominant position in the field of public property. By the end of September 2021, the company had 1626 property management projects, with a management area of 220 million square meters, ranking firmly in the forefront of listed property management companies. In the first three quarters, the newly signed annual contract amount was 2.08 billion yuan, a year-on-year increase of 15.8%, of which the non residential business was 1.61 billion yuan, accounting for 77.3%, maintaining the leading edge of the non residential property market.
Build the flagship of property management of central enterprises, and the management and operation efficiency is expected to be further improved. Since the reorganization of the company, the historical problems left over have brought some negative effects on the optimization of the company’s organization and the improvement of efficiency. We believe that the recent landing of M & A and the separation of light and heavy assets reflect the company’s efforts in integrating resources and gradually improving management ability. At present, the company’s profit margin still lags far behind the industry average. We believe that the follow-up companies are expected to further focus on the main business, accelerate the implementation of strategy and boost the profit space.
Profit forecast and investment suggestions
Maintain the overweight rating and raise the target price to 21.71 yuan (the original target price was 18.16 yuan). Taking into account the company’s divestiture of some heavy asset businesses and recent mergers and acquisitions, we slightly reduced the income growth rate of asset management business and increased the income growth rate of property business, and adjusted the predicted value of EPS of the company from 2021 to 2023 to 0.62/0.78/0.95 yuan (the original predicted value was 0.60/0.80/1.03 yuan). The valuation of comparable companies in 2021 is 35x, corresponding to the target price of 21.71 yuan.
Risk tips
The stripping of real estate business is uncertain. Profit margin improvement was lower than expected. The uncertainty of expanding the market.
