- March 31, 2021
We reiterate our Buy rating on Central China New Life, following its stronger than expected 2020 results. We believe that there is upside risk to our FY2021E-2022E earnings estimates as profit margins came in better than expected.
Key Highlights:
As we mentioned in our research report “Opportunities Emerging in Property Management Sector”, dated 31 Dec 2020, we see deep value in the small-mid cap property management stocks such as Central China New Life.
- Ecosystem matures, profit margin expands: We believe there is upside risks to our 2021E-2022E net profit forecasts, as the companies’ core net margins expanded to 16% (AMTD: 14%), which is attributable to monetization of its maturing ecosystem, in our view.
- If we assume the same core net margins are maintained going forward, it could potentially result in an upside risk of 16-18% to our 2021E-2022E net profit forecasts, respectively.
- Central China New Life’s net profit came in at RMB426m, 16% above our expectations (AMTD: RMB366m), mainly due to a higher than expected net margins.
- We believe the appointment of Mr. Wang Qian as Executive Director is an important milestone for the company’s development and its long-term growth as Central China New Life seeks to further monetize on its user base of homeowners, especially through its Jianye+ platform.
- Central China New Life’s GFA Under Management has grown by 75.5% YoY in 2020 to reach 100m sqm, of which 45% are projects of third-party developers. We expect the company continue to grow by 50% YoY in scale during 2021.
