According to Orient Securities Research Report, Shimao Services (00873) achieved revenue of 4.10 billion yuan in the first half of the year, -3.9% year-on-year, and net profit of 150 million yuan, or +10.9% year-on-year. In the first half of the year, the company's basic property service revenue reached 2.61 billion yuan, an increase of 11.5% over the previous year. The main growth driver was the continuous expansion of the area managed by third parties.
According to the bank, the company's cost control effect was obvious. The sales expenses rate for the first half of the year was 1.5%, down 1.0 percentage point from the previous year; the management expenses rate was 10.9%, a slight decrease of 0.1 percentage points from the previous year. Financial expenses affected by interest accrued on convertible bonds for the same period in '22 were about 100 million yuan. Net financial revenue after not being affected in the first half of this year was about 100 million yuan, which was a significant positive increase in net profit. The company's cash flow improved markedly in the first half of the year. Net cash inflow from operating activities was 350 million yuan, a rapid increase of 2.75 billion yuan over the previous year. The net cash ratio reached 1.7 billion yuan, and the quality of operations improved.
Based on the company's mid-term business situation, the bank adjusted the revenue growth rate and gross margin forecast for various businesses, as well as the sales and management expenses rate forecast. The adjusted EPS forecast value for 23-25 was 0.21/0.22/0.26 yuan (the original forecast was 0.33/0.40 yuan for 23-24). The comparable company's PE valuation in 2023 is 8x, corresponding to a target price of HK$1.81. (HKD 1 = RMB 0.919). Maintain ratings to increase holdings.