The company’s earnings were inline with Bloomberg consensus, with NP+18.9% YoY in 1H24 thanks to effective cost control. We think the 2024E targetNP growth of >20% is not hard given consolidation of an acquired company,continued cost control and a low base in 2H. We find that the company’sindependence has largely improved, and parentco’s risk has largely eased.Considering its strong central SOE heritage amidst intensifying competition inthird-party expansion, we upgrade rating from HOLD to BUY , and our TP is atHK$ 4.91, representing 10x 2024E P/E. TP is lowered by 10% as we haveadjusted our FX rate applied.\r
1H24 earnings inline thanks to effective cost control. Revenue rose10.2% YoY to RMB1.5bn, supported by a 34.6% YoY increase in Basic PMto RMB1.0bn. VAS to developers fell 20.8% YoY to RMB177mn due tobusiness contraction, and Owner VAS declined 19.6% YoY to RMB305mndue to weak consumer sentiment. Gross profit margin (GPM) contracted1.8ppt YoY to 24.6%, impacted by VAS to developers, while Basic PM sawa 1.3ppt GPM improvement given higher project density, and Owner VASGPM increased 3.6ppt to 42.3%, aided by parking space sales. NP growthreached 18.9% YoY, aided by a 4.8ppt YoY reduction in the SG&A ratio to6.9%.\r
Guidance unchanged with NP growth >20%. Despite the challenging2H24, management maintained its 2024E guidance, aiming for NP growthof 20%. We believe such growth can be achieved, given: 1) the acquisitionof RUNWU JIAYE, expected to be consolidated in 2H, adding approximately8mn sqm to managed-GFA, which we estimate could contribute about 27%to the full-year total; 2) the continuation of overhead reduction efforts into2H; and 3) a low base in 2H, requiring only 12% NP growth in 2H24 to meetthe target.\r
Independence largely improved. We find that the proportion of managedGFA from third parties has risen from 33% at the time of listing in 2022 to50.5% in 1H24. Third-party contribution to contracted-GFA now stands at54%. The GP contribution from VAS to developers decreased to 15.1% in1H24 from 36.9% in 2022. Meanwhile, asset impairment risks from theparentco, China Jinmao, have been largely addressed, with it returning toprofitability in 1H24. The company anticipates the parentco to deliver c.6mnsqm of managed-GFA for the full year.\r
Upgrade to BUY. Jinmao Property Services was valued lower due toconcerns over its weaker organic growth capabilities. Given theaforementioned factors, we now believe the company's independence haslargely improved to industry average level. Amidst intensified competition inthird-party expansion, its SOE parentco and related party Sinochem willprovide stable support to the PM arm. We upgrade our rating to BUY with aTP cut by 10% to HK$ 4.91 (due to FX rate change), representing a 10x2024E PE. Risks: underperformance in third-party expansion; deteriorationin accounts receivable quality.
