2021 results slightly below market expectations
Jinke Smart Services announced that revenue grew 77% YoY in 2021 to Rmb5.97bn and attributable net profit rose 71.4% YoY to Rmb1.06bn, slightly lower than market expectations of Rmb1.1bn.
Results miss market expectations mainly on increase in provisioning for impairment of receivables. We believe the difference between the firm’s actual profit and market expectations stems from Jinke Smart’s net impairment loss of around Rmb68.73mn on financial assets （Rmb8.21mn in 2020）。 Provisioning of Rmb78.18mn, representing around 3.8% of total trade receivables at end-2021 （vs. 1.1% in 2020） was charged for impairment of trade receivables. We believe this relates to the delayed payment of fees from some large clients, and low collection rate of some newly delivered vacant properties.
New business ecosystem starts; profit structure improves. Jinke
Smart established four business lines, namely: space property management services （incl. basic property management services and VAS to non-property owners）， community value-added services （VAS）， local catering services, and solutions for smart living technology. We think these new business lines reflect the firm’s strategy for future development. In 2021, community VAS and local catering services contributed 36% of gross profit （vs. 13% in 2020）。 The portion of VAS to non-property owners in gross profit dropped to 24% （vs. 32% in 2020）， and the profit structure significantly improved.
Expansion of managed GFA in line; clear advantages in regional density. Managed and contracted GFA at end-2021 totaled 238mn sqm and 360mn sqm, increases of about 81mn sqm and 93mn sqm vs. end-2020. In 2021, third-party bidding projects and M&As added about 38.6mn sqm and 30mn sqm to the new managed GFA in line with guidance. At end-2021, around 49% of the firm's managed GFA was located in southwest China. We think that the firm has clear advantages in regional density.
Trends to watch
Rapid growth continues. The firm guided that managed and contracted GFA would grow 100mn sqm, and 120mn sqm in 2022, with third-party bidding projects contributing half of the incremental GFA, and the rest from M&As. We expect local catering services and smart living technology solutions segments to continue growing rapidly.