Investment Summary

CIFI Ever Sunshine Services announced positive profit alert for 1H21. It is expected that the company's unaudited consolidated net profit and net profit attributable to the parent for the six months ended June 30, 2021 will increase by more than 55% over the same period last year. The increase in net profit was mainly due to the increase in the GFA under management; the increase in revenue from community VAS and VAS provided to non-owners, and the business recovery after the impact of the new crown pneumonia epidemic.

Bright revenue growth, abundant company reserves

The company's net profit and net profit attributable to the parent in the first half of last year were RMB 200 million and 170 million, respectively. The company stated that it will increase by no less than 55% from last year which is estimated to be CNY 310 million and CNY 270 million respectively. During the period, the company successively won the bids for a number of external projects, and made breakthroughs in the school segment and public property segment. It won the bids for 9 school property management subjects and public property management subjects, including projects such as Hunan University of Technology and Hunan Xiangxi Expressway Service Area.

In the semi-annual work conference held by the company earlier, with “scale as king and quality as first priority“ as the theme, it clearly pointed out the goals and tasks for the whole year of 2021. In the future, property services will develop around "people + system + technology", put people at the core of everything, and let technology and systems help to improve the quality of services to people. The company adheres to a consistent development strategy and fully implements the development strategy of "platform + ecology". The company has set 2021 as the year of quality improvement, and set six management goals and 29 key tasks. 1. Scale expand, four-wheel drive; 2. Fine operation experience upgrade; 3. Active service, reputation brand; 4. Professional BU , Accelerate marketization; 5. Structure optimize, upgrade the organization; sixth, smart property, driven by digital intelligence.

The company independently make its professional business as BU. At present, Yongsheng has six VAS brand. A professional team is responsible for product development and research on how to reach the owner accurately. On the business side, the company adopts a business-raising plan. On the one hand, it cooperates with big brands to jointly empower, and on the other hand, it also splits with localized small businesses. There will be no more than two single-category suppliers in a community to form `Support business plan`. On the client side, focusing on cultivating the owner's habit, through time-based or scenario-based sales strategies, the owner's stickiness to the company's value-added services is improved, and the path dependence and mental cycle of the user side are formed.

Valuation and investment advice

We think that the company's performance in 1H21 is in line with expectations, the expansion of GFA under management is smooth, and the reserve GFA is sufficient to support future development and achieve the company's guideline of 10 times of net profit in 5 years.

The company did not announce any other acquisition plans in the first half of the year. The company currently has sufficient cash and can look for other investment opportunities in the market and look forward to the company's new acquisition plan. The company's long-term investment logic remains unchanged. The company's development practice in community VAS is at a better level in the industry. With the industry integration in the future, the growth of income from property management services will slow down, and VAS will become the second driver of the company's growth. power. The company builds brand reputation through high-quality standardized services, and continues to expand community VAS, and further develops towards life service providers. Taking into account that the company has more consumption attributes than other peers, the company is given a 1.1x PEG for 2021 and maintains a target price of HK$25.87, corresponding to 58.51x/39.66x expected P/E ratios in 2021 and 2022, and maintains a buy rating.

(Current price as of August 16)

Financials

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