COPH’s 1H24 revenue grew 9.0% YoY to RMB6.8bn, less than we had expected. Property management and VAS to residents revenue grew by 14.2% YoY and 10.3% YoY, respectively, while VAS to non-residents revenue declined by 13.7% YoY. Gross margin improved by 0.8ppt, better than we had expected. Gross margin of all segments except for car park trading improved, thanks to efficiency and business structure improvements. SG&A as % of revenue also reduced by 0.2ppt. As a result, net profit grew by 16.0% YoY to RMB738m, largely in line with our expectation. DPS increased by 54.5% YoY to HK$0.085. We cut our 2024-26E revenue by 7.5-8.9%, respectively, while increasing our 2024- 26E net margin estimation by 0.9-1.0ppt. As a result, our 2024-26E EPS is largely unchanged. We like COPH’s strong market expansion and improving efficiency and margin. We see its 7.5x 2025E P/E as undemanding given double digit earnings growth. Maintain BUY.
Key Factors for Rating
New annualised contract value from third parties increased by 9.3% YoY to RMB1.03bn, while new contracted GFA from third parties decreased by 25.1% YoY to 41m sqm, showing higher average management fee. Number of new projects with over RMB10m annualised contract value increased by 111.5% YoY to 34. GFA under management increased by 21.2m sqm to 422.7m sqm, among which 40.8% is from third-party, up from 40.5% by end-2023. Non-residential projects account for 30.4% of the total GFA under management, up from 28.2% by end-1H23. Contract value of the 21.2m new GFA under management is RMB1.6bn, among which 56.3% is from third party, and 43.4% is from non- residential projects.
DPS increased by 54.5% YoY to HK$0.085. Management is committed to 35% dividend payout ratio, up from 30% in the past. As usual, OCF for 1H is not disclosed until the release of interim report. We estimate OCF in 1H to remain negative, the same as 1H23 and 1H22, and expect OCF to turn positive for FY as cash collection ramp up in 2H. Trade receivable increased by 19.0% YoY to RMB3.5bn.
Key Risks for Rating
Cash collection rate may deteriorate under economic challenge
Valuation
Our TP is derived with 15x 2025E P/E. The stock currently trades at 7.5x 2025E P/E, which we see as undemanding, given double-digit earnings growth, strong market expansion, as well as improving efficiency and margin.