BOC International released a research report stating that it believes there is limited room for a further decline in the stock price, maintaining the “buy” rating of Elegant Living Services (03319), and the target price was lowered to HK$4.2. The bank believes that as the company's dependence on cyclical business decreases further, profit margins will soon bottom out. The company's fundamentals remain stable and dividend payments resume. Coupled with the current low valuation, it is expected that the real estate industry will grow more flexible in the future when it recovers.
The bank said that Ya Life's 2023 results and dividends fell short of expectations: total revenue increased 0.4% year on year to 15.44 billion yuan (same below), 3.4% lower than the agency's unanimous forecast, mainly due to a 47% year-on-year decline in revenue from extended value-added services. Gross margin fell 4.9 percentage points year over year to 17.1%, and all four business segments recorded a decline in gross margin.
Affected by the above decline in gross margin and increased asset impairment losses (up 107% year on year to 963 million yuan), net profit decreased by 74.9% year on year to 460 million yuan, which is worse than market expectations. After deducting one-time losses such as amortization and impairment, adjusted core net profit was 1.55 billion yuan, which was generally in line with expectations. The company proposes to pay a final dividend of 0.06 yuan (no dividend last year) and a dividend of 0.085 yuan for the whole year, with a dividend ratio of about 26%.