We maintain "Buy" rating and trim TP to HK$3.90. We believe the Company is bearing fruit from its efficiency improvement for the next few years. We forecast the Company's 2024F-2026F EPS to be RMB0.225, RMB0.263 and RMB0.312, respectively, implying a CAGR of 18.3% during 2023-2026F. We trim our TP to HK$3.90, by applying 16.0x 2024F PER. We maintain our "Buy" rating.
Solid growth in 2023 with improved operating efficiency. In 2023, the Company's total revenue recorded steady growth of 17.1% YoY to RMB17.39 bn. Thanks to its cost control measures, in 2023, the Company's core operating profit increased by 32.1% YoY to RMB1,296 mn. However, on the other hand, the Company made large impairment losses on its financial instruments. Finally, the shareholders' net profit recorded a slower growth of 10.6% YoY, reaching RMB605 mn in 2023. The management declared a final dividend of HKD0.150/share.
Greentown service has turned around the trend of GPM squeeze in 2023. After two consecutive years of GPM decline, the Company finally recorded slight GPM rebound in 2023. In 2023, except the technology services, Greentown service achieved GPM improvement in all business segments. The GPM of property services/ consulting services/ community living services increased by 0.9 ppt/ 0.7 ppt/ 0.7 ppt YoY in 2023, respectively. We expect the Company to realize higher growth of core operating profit than the revenue in the next few years.
High dividend payout and active share repurchase. Greentown Service declared a generous dividend payout ratio of 73%, up by 19 ppts YoY. In addition, the Company repurchased a total of 44.34 mn shares at the cost of HKD140 mn. According to the management, the share repurchase may continue in 2024, depending on the market situation.
Catalysts: 1) Market share gains; 2) fast growth from the development of its VAS; and 3) more cooperation with local governments and SOEs.
Downside risks: 1) Real estate market slump worsens; 2) hurdles in raising property management fee; and 3) impairment risk from account receivables.