Shoucheng is China’s leading car park management firm and real estate fund operator under SOE-parentco Shougang Group. 2023E will be a good financial year for Shoucheng as rapid traffic recovery and CSRC’s push for C-REITs would greatly boost its parking business and fund size growth （it has early move advantage in C-REITs）。 In the medium term, C-REITs would also help the company transit into an asset-light model - listing its mature car parks and industrial parks into C-REITs. Therefore, we expect Shoucheng to deliver 42%/15% revenue/NP CAGR in 2022-24E, roughly in line with its incentive plan requirement.
　　Besides, we think the share price has limited downside due to its high dividend yield at 7% and HKD300mn share buyback plan （enough for 2.3% stakes）。 Initiate at Buy with TP of HK$2.19 using 15x 2023E PE, 10% discount to the average of its global peers. Catalyst: another round of special dividend after selling the remaining Shougang resources for HK$2.2bn.
　　The key parking space consolidator on a rising traffic: the car park　shortage （26% gap） may boost the construction of parking lot at 10% CAGR to 322mn units by 2025E （or 0.85:1）。 This would make parking fee business an RMB700bn market by 2025E （assume 30% of parking used for rental purpose and 20% utilization rate）。 We expect Shoucheng to be the key beneficiary to consolidate and grow number of its managed parking lots by 44% CAGR given its SOE background, smartization know-how （EV charging and system）， strong cash position. Together with a rising traffic in 2023E after COVID （already back to 2019 level）， we expect its parking revenue to deliver 66% CAGR in 2022-24E.
　　First-move advantage into C-REITs to boost its fund AUM: With CSRC’s　green light in 2021, the C-REITs market has grown rapidly to 23 listings, RMB80bn size and 25% returns. We expect C-REITs size to further grow at 50% CAGR in 2023-24E to RMB180bn as CSRC would potentially allow more asset classes like green energy/commercial assets and encourage private real estate fund to invest. This would help Shoucheng boost its fund AUM given its first-move advantage through direct investments in nine REITs and pre-REITs preparation of its quality industrial and car parks. For example, it has just raised a RMB4.5bn pre-REITs fund with China life and Shougang Group. Going forward, we expect fund size to grow at 8% 2022-24E CAGR at RMB4.5bn per year （10% of C-REITs annual issuance size） to reach RMB64bn. This would drive a revenue growth of 12% CAGR in 2022-24E with high GPM at 70%.
　　High dividend yield and share buy back as downside cushion: Due to its　rich cash position, Shoucheng is likely to keep its high dividend payout policy at 80% or 7% dividend yield in 2023E. Also It plans to further dispose the remaining 17% Shougang resources （639.HK） worth of HKD2.2bn and may pay special dividend （they paid HKD200mn special dividend in Feb22 after disposing 11% of Shougang resources）。 Besides, it has HKD300mn share buyback plan （HKD20mn used） with repurchase price up to HKD1.5/share.
　　Initiate at Buy. We forecast revenue to grow at 42% CAGR in 22-24E with parking business （+66% CAGR）。 This mix shift puts NPM down to 34% by 2024E. Net net, we expect NP to grow 15% in 22-24E. Risk: More intensified- than-expected competition into C-REITs after CSRC’s trial in real estate fund.