20250403-招银国际-滨江服务-03316.HK-Expansion_outside_Zhejiang_to_support_GFA_growth__Maintain_BUY_6页_1mb

Binjiang Service (3316 HK) Summary

Core Content

Binjiang Services (3316 HK) reported a 28% YoY revenue growth to RMB 3.6bn in FY24, 3% above CMBI's estimate. This growth was driven by managed GFA expansion and a strong renovation business. However, the net profit only grew 11% YoY to RMB 550mn, 2% below the forecast, due to a 1.5ppt decline in gross margin and an additional RMB 50.5mn in withholding tax from a fund transfer to Hong Kong for dividends. Excluding the one-off tax impact, core net profit grew 21% YoY to RMB 600mn, 7% above CMBI's estimate.

Main Points

• Growth Drivers:

  • Managed GFA from third parties expanded 21% YoY to 37.4mn sqm, significantly outperforming the industry average of 8%.
  • Community VAS revenue increased 62% YoY, reflecting strong performance in the renovation business.
  • Property management services revenue grew 24% YoY, contributing to the overall growth.

• Future Expansion Strategy:

  • The company has 91% of third-party GFA in Zhejiang and 62% in Hangzhou.
  • It plans to focus on expansion in high-tier cities outside Zhejiang to avoid lower margins and collection issues in lower-tier cities within the province.

• Shareholder Returns:

  • The basic payout ratio was raised by 10ppt to 70%, with a dividend yield of 5.9% in FY24 and 7.0% in FY25E.
  • The company is expected to sustain the 70% payout ratio in the future.

Key Financials

Key Information

• Growth Trends:

  • The company's revenue growth is expected to slow in the future, with 15.3% YoY in FY25E and 14.6% YoY in FY26E.
  • Core net profit is projected to grow at 17.6% YoY in FY25E and 13.7% YoY in FY26E.

• Earnings Revisions:

  • CMBI's estimates for FY25E, FY26E, and FY27E are slightly lower than the previous estimates, with a revenue decrease of 0.2%, 3.4%, and no change respectively.

• Valuation Comparison:

  • The company's P/E ratio is 10.2x for FY25E, slightly below the industry average of 13.8x.
  • Dividend yield is expected to rise from 5.9% in FY24 to 7.0% in FY25E.

Risks

• Slower-than-expected third-party expansion.
• Receivables impairment could affect future performance.
• Regional concentration may pose challenges as the company's focus shifts to new cities.

Analyst Recommendations

• Maintain BUY with a target price of HK$32.86, based on a 13x 2025E P/E.
• The target price is a minor discount from the industry average of 14x due to the company's regional concentration.

Shareholding Structure

• Great Dragon Ventures Ltd: 45.9%
• HaoYu Ventures Ltd: 12.9%

Stock Performance

• 1-month return: 16.3%
• 3-month return: 24.6%
• 6-month return: 24.3%

Financial Summary

Valuation Comps

Summary

• Revenue Growth: Strong YoY growth driven by GFA expansion and renovation business.
• Net Profit: Growth impacted by lower gross margins and tax issues, but core net profit shows strong performance.
• Shareholder Returns: Dividend yield is attractive, and payout ratio is expected to remain at 70%.
• Valuation: The company is undervalued compared to industry average, with a target price of HK$32.86.
• Risks: Regional concentration and potential for slower third-party expansion.
• Recommendation: Maintain BUY, as the company is well-positioned for future growth with strong shareholder returns.