Core Viewpoint - CICC has downgraded the 2025 profit forecast for Poly Property (06049) by 6% to HKD 1.55 billion, reflecting a 5% year-on-year growth, while introducing a 2026 profit forecast of HKD 1.62 billion, also a 5% year-on-year growth. The target price has been reduced by 9% to HKD 38.6, indicating a 25% upside potential based on a 13x target P/E for 2025 [1] Group 1 - The bidding expansion strategy is expected to drive stable growth in the core property management segment, with a projected annual contract value of new third-party projects in 2024 at HKD 3.01 billion, remaining flat year-on-year. The commercial and public service sectors are expected to see a 13% year-on-year increase in contract value to HKD 2.75 billion [2] - The overall revenue growth rate for the core property management segment is anticipated to exceed 10%, with third-party project revenue growth potentially outpacing the overall growth [2] Group 2 - In the value-added services segment, non-owner value-added income may face pressure due to the current real estate market conditions and short-term challenges in office leasing. However, there is potential growth in community maintenance and elevator maintenance services. The company has shifted its strategy from a broad product range to focusing on core products, leading to a slight decline in overall revenue [3] - By 2025, the adjustment in business layout is expected to conclude, stabilizing profitability in community value-added services [3] Group 3 - The company reported a net operating cash flow of HKD 2.3 billion in 2024, with a coverage ratio of 1.6 times against net profit attributable to shareholders. This is expected to provide support for operating cash flow in 2025 [4] - The dividend payout ratio is set to increase by 10 percentage points to 50% in 2024, reflecting the management's commitment to shareholder returns. The company aims to enhance operational quality while steadily optimizing its dividend mechanism [4]

Investment Rating - The investment rating for Poly Property (06049.HK) is "Buy" (maintained) [1] Core Views - The company has shown steady growth in revenue and profit, with a notable increase in the dividend payout ratio to 50%. The management expects a recovery in profitability following business optimization adjustments [5][6] - The revenue for 2024 reached 16.34 billion HKD, representing an 8.5% year-on-year increase, while the net profit was 1.47 billion HKD, up 6.8% year-on-year. However, gross and net profit margins have slightly declined [6] - The property management revenue grew by 15.0% year-on-year to 11.67 billion HKD, accounting for 71.4% of total revenue, despite a slight decrease in gross margin [7] - The company has adjusted its earnings forecasts for 2025-2026 and introduced new estimates for 2027, projecting net profits of 1.58 billion, 1.72 billion, and 1.88 billion HKD for 2025, 2026, and 2027 respectively [5][9] Financial Summary - For 2024, the company reported a revenue of 163.42 billion HKD, with a year-on-year growth of 8.5%. The net profit was 14.74 billion HKD, reflecting a 6.8% increase. The gross margin was 18.3%, down 1.3 percentage points, and the net margin was 9.1%, down 0.2 percentage points [6][9] - The company’s cash and bank balance stood at 11.87 billion HKD at the end of 2024, a 7.8% increase year-on-year, with trade receivables rising by 4.8 billion HKD [6] - The earnings per share (EPS) for 2025 is projected at 2.86 HKD, with a price-to-earnings (P/E) ratio of 9.9 times [5][9]

Core Viewpoint - The Huizhou Housing and Urban-Rural Development Bureau announced a list of 28 real estate companies, intermediary agencies, and property service companies that were found to be violating regulations in 2025, highlighting ongoing issues in the real estate sector [1] Group 1: Real Estate Development Companies - Five real estate development companies were reported for violations, primarily related to illegal sales practices [2] - Specific violations included unauthorized structural changes, failure to deposit purchase funds into regulatory accounts, and selling parking spaces without proper rights [2][3] Group 2: Intermediary Agencies - Ten intermediary agencies were reported, including the leading company Beike, for failing to register personnel and not displaying necessary business licenses and service standards [2][3] - Other violations included expired registration certificates and lack of proper transaction fund supervision [3] Group 3: Property Management Companies - Thirteen property management companies were reported for issues such as improper parking of electric vehicles, lack of transparency in parking revenue, and inadequate safety measures [3][4] - Specific companies faced issues like missing fire extinguisher labels, low pressure in fire extinguishers, and unmonitored surveillance systems [4]

Group 1 - Hefei City Housing Provident Fund Management Committee has announced a policy to support the use of housing provident funds for purchasing affordable housing, reducing the down payment ratio to 15% and adjusting the repayment capacity coefficient from 0.5 to 0.6 [1] - Chengdu has implemented interim measures for the management of affordable housing, establishing a closed management system to prevent the conversion of affordable housing into commercial housing, which may shift some demand from the commercial housing market [2] - China Resources Land has issued 2 billion yuan of medium-term notes with a low interest rate of 2.20%, indicating a relative advantage in financing for state-owned enterprises compared to private firms [3] Group 2 - The meeting for the bondholders of Zhengrong Real Estate has been postponed, reflecting ongoing disagreements regarding repayment conditions and potentially increasing market concerns about the efficiency of debt restructuring for real estate companies [4] - Poly Property has completed the conversion of 194 million domestic shares to H-shares, significantly increasing the liquidity in the secondary market and enhancing the company's capital structure, which may attract international capital [5][6]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][3][23] Core Views - The company achieved a revenue of 16.3 billion yuan in 2024, representing an 8% year-on-year growth, and a net profit of 1.5 billion yuan, which is a 7% increase year-on-year. The property management service revenue grew by 15% to 11.7 billion yuan, while community value-added service revenue was 2.7 billion yuan [1][9] - The overall gross margin for 2024 was 18.3%, down by 1.3 percentage points, and the net profit margin was 9.0%, down by 0.2 percentage points. The management expense ratio decreased to 6.9%, down by 1.2 percentage points. The dividend payout ratio reached 50%, an increase of 10 percentage points year-on-year [1][9] - The company expanded its presence to 194 cities with 2,821 managed projects and 3,230 contracted projects, covering a total area of 990 million square meters. The new contract amount for the year was 3 billion yuan, with office and public service expansions contributing 1.1 billion and 1.6 billion yuan, respectively [2][19] - Community value-added service revenue stabilized at 2.7 billion yuan, with a gross margin of 36.8%, down by 1.6 percentage points. Community life service revenue accounted for 69% of this segment, while community asset management services made up 31% [2][19] - The company reported a cash balance of 11.9 billion yuan, an 8% increase year-on-year, with operating cash flow covering net profit by 1.5 times. Trade receivables stood at 2.8 billion yuan, with over 90% due within one year [2][19] Financial Forecasts - The revenue forecast for 2025 and 2026 is adjusted to 17.5 billion yuan and 18.7 billion yuan, respectively, down from previous estimates of 19 billion yuan and 21.3 billion yuan. The net profit forecasts for the same years are 1.6 billion yuan and 1.7 billion yuan, revised from 1.8 billion yuan and 1.9 billion yuan [3][4] - The expected earnings per share (EPS) for 2025 and 2026 are 2.84 yuan and 3.05 yuan, with corresponding price-to-earnings (PE) ratios of 9.1 and 8.9 times [3][4]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][3][19] Core Views - The company achieved a revenue of 16.3 billion yuan in 2024, representing an 8% year-on-year growth, and a net profit of 1.5 billion yuan, which is a 7% increase year-on-year. The property management service revenue was 11.7 billion yuan, up 15% year-on-year, while community value-added service revenue was 2.7 billion yuan [9][19] - The overall gross margin for 2024 was 18.3%, a decrease of 1.3 percentage points year-on-year, and the net profit margin was 9.0%, down 0.2 percentage points year-on-year. The management expense ratio was 6.9%, down 1.2 percentage points year-on-year. The dividend payout ratio reached 50%, an increase of 10 percentage points year-on-year [9][19] - The company expanded its presence to 194 cities by the end of 2024, managing 2,821 projects with a total contracted area of 990 million square meters. The new contract amount for the year was 3 billion yuan, with office and public service expansions contributing 1.1 billion and 1.6 billion yuan, respectively [2][19] - The community value-added service revenue stabilized at 2.7 billion yuan in 2024, with a gross margin of 36.8%, down 1.6 percentage points year-on-year. Community life service revenue accounted for 69% of this segment, while community asset management service revenue made up 31% [2][19] - The company reported a cash balance of 11.9 billion yuan, an 8% increase year-on-year, with operating cash flow covering net profit by 1.5 times. Trade receivables stood at 2.8 billion yuan, with over 90% due within one year, and contract liabilities increased by 24% to 1.8 billion yuan [2][19] Financial Forecasts - The revenue forecast for 2025 and 2026 is adjusted to 17.5 billion yuan and 18.7 billion yuan, respectively, down from previous estimates of 19 billion yuan and 21.3 billion yuan. The net profit forecasts for the same years are 1.6 billion yuan and 1.7 billion yuan, revised down from 1.8 billion yuan and 1.9 billion yuan [3][19] - The expected earnings per share (EPS) for 2025 and 2026 are 2.84 yuan and 3.05 yuan, with corresponding price-to-earnings (PE) ratios of 9.1 and 8.9 times [3][19] - Key financial metrics for 2024 include a revenue growth of 8.5%, a net profit growth of 6.8%, and a return on equity (ROE) of 15.2% [4][21]

Core Viewpoint - The property management industry is transitioning to a high-quality development phase, leading to a downward revision of Poly Property's (06049) EPS forecasts for 2025-2026 to RMB 2.84/3.05 from the previous RMB 3.18/3.60, with a new 2027 EPS forecast of RMB 3.33, reflecting growth rates of 6.5%, 7.4%, and 9.4% respectively, and a target price adjustment to HKD 36.68 based on a 12x PE for 2025 [1] Financial Performance - In 2024, the company achieved total revenue of RMB 16.342 billion, a year-on-year increase of 8.5%, and a net profit attributable to shareholders of RMB 1.474 billion, up 6.79% year-on-year [2] - The company optimized its cost structure, resulting in a management expense ratio of 6.9%, down 1.2 percentage points year-on-year, with comprehensive gross and net profit margins of 18.26% and 9.02%, respectively, reflecting decreases of 1.35 and 0.14 percentage points year-on-year [2] Cash Flow and Shareholder Returns - The company maintains a robust cash flow, with operating net cash flow of RMB 2.3 billion in 2024, covering net profit by 1.5 times [3] - The board proposed a dividend of RMB 1.332 per share (before tax) for the year ending December 31, 2024, representing a 33.5% increase year-on-year, with a payout ratio of 50%, up 10 percentage points from 40% in 2023 [3] Market Expansion and Quality Improvement - By the end of 2024, the company managed a contract area of approximately 988.1 million square meters and a managed area of 803.4 million square meters, serving 2.29 million households across 194 cities [4] - In 2024, the company achieved a record high of approximately RMB 300.52 million in new third-party project contracts, with 79.5% of new contracts coming from 50 core cities, including significant contributions from Beijing, Guangzhou, Shanghai, Chengdu, Changsha, and Tianjin [4] - The company improved the structure of its market expansion, with 75.9% of new contracts in five core non-residential sectors, an increase of approximately 10.3 percentage points year-on-year, and 90 new projects exceeding RMB 10 million in contract value, accounting for about 65.0% of new contract amounts [4]

Investment Rating - The investment rating for the company is "Buy" (maintained) [4][14] Core Views - The company achieved a revenue of 16.342 billion RMB in 2024, representing a year-on-year growth of 8.5%, while the net profit attributable to shareholders was 1.474 billion RMB, up 6.8% year-on-year [5][7] - The company is focusing on cost reduction and efficiency improvement while expanding the quality of its services [4][6] - The company proposed a final dividend of 1.332 RMB per share, increasing the payout ratio from 40% to 50% of net profit attributable to shareholders [7][11] Revenue Performance - The company reported a revenue of 16.342 billion RMB for 2024, with a year-on-year growth rate of 8% projected for 2025 and 2026 [4][8] - The revenue increase was primarily driven by the continuous expansion of property management services [7][10] Profitability Metrics - The gross profit margin slightly declined from 19.61% in 2023 to 18.26% in 2024, with specific service segments experiencing varying degrees of margin compression [7][10] - The net profit margin for 2024 was 9.0%, with a projected decline in return on equity (ROE) from 16% in 2024 to 13.2% by 2027 [4][13] Business Segmentation - The property management service segment generated 11.675 billion RMB in revenue, reflecting a 15% year-on-year increase, while non-owner value-added services saw a revenue decline of 6.4% [8][10] - The company secured new third-party project contracts worth 3.005 billion RMB in 2024, with a significant portion of its managed area coming from third-party projects [8][10] Future Earnings Forecast - The earnings per share (EPS) estimates for 2025 and 2026 have been adjusted to 2.88 RMB and 3.09 RMB, respectively, with a new forecast for 2027 set at 3.33 RMB [10][13]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected investment return exceeding 15% over the next 6-12 months [6]. Core Insights - The company achieved a revenue of 16.34 billion RMB in 2024, reflecting a year-on-year growth of 8.5%, and a net profit of 1.47 billion RMB, up 6.8% year-on-year [1]. - The company has increased its dividend payout ratio to 50%, with a proposed dividend of 1.332 RMB per share, marking a 33.5% increase from the previous year [3]. Summary by Sections Performance Overview - The company reported a revenue of 163.4 billion RMB for 2024, with a gross profit of 29.8 billion RMB, and a net profit margin of 9.1%, slightly down by 0.2 percentage points [1]. - The cash and bank balance at the end of 2024 was approximately 11.9 billion RMB, an increase of 7.8% compared to the end of 2023 [1]. Business Structure and Growth - The company has adjusted its business structure, leading to improved operational efficiency. The revenue from property management, non-owner value-added, and community value-added services was 116.7 billion RMB, 19.6 billion RMB, and 27.1 billion RMB respectively, with growth rates of +15.0%, -6.4%, and -3.9% [2]. - The company has achieved a record high in external contract amounts, with 3 billion RMB in new third-party project contracts in 2024, focusing on core cities [3]. Cash Flow and Dividend Policy - The company has effectively managed its cash flow, with a net operating cash flow of 2.3 billion RMB, covering net profit by 1.55 times. The accounts receivable net value was about 2.8 billion RMB, accounting for 17.1% of total revenue [3]. - The dividend payout ratio has been increased to 50%, reflecting a commitment to returning value to shareholders [3]. Profit Forecast and Valuation - The company’s net profit forecasts for 2025 and 2026 have been adjusted to 1.57 billion RMB and 1.71 billion RMB respectively, with a new forecast for 2027 set at 1.8 billion RMB [4]. - The projected price-to-earnings ratios for the upcoming years are 11, 10, and 9 times for 2025, 2026, and 2027 respectively, indicating strong earnings visibility [4].

Summary of Poly Property Conference Call Company Overview - **Company**: Poly Property - **Year**: 2024 performance and 2025 outlook discussed Key Financial Performance - **Revenue Growth**: 8.5% increase to 16.3 billion RMB in 2024 [3] - **Profit Growth**: 6.8% increase to 1.474 billion RMB [3] - **Core Property Management Revenue**: 71.4% of total revenue, driven by residential project management from Poly Development [3][4] - **Community Value-Added Services**: 16.6% of total revenue, amounting to 2.71 billion RMB, with 70% from community life services [4] - **Non-Owner Value-Added Business**: 12% of total revenue, generating 1.96 billion RMB [3][4] - **Cash Reserves**: Approximately 11.9 billion RMB, with operating net cash flow of 2.3 billion RMB [3][4] - **Net Profit Coverage Ratio**: 1.5 times, indicating strong financial health [3] 2025 Outlook - **Revenue and Profit Growth**: Expected to maintain growth of over 5% [3][4] - **Core Property Management Growth**: Anticipated to exceed 10% [3] - **Community Value-Added Services**: Facing downward pressure but expected to stabilize overall [3] - **Dividend Policy**: Plans to increase dividend payout ratio to enhance shareholder returns [3] Operational Strategies - **Project Management**: Improved collection rate for service fees to 86%, up by 1.4 percentage points [3][5] - **Focus Areas**: Concentrating on core cities, key business types, and large clients, with a focus on projects over 10 million RMB [5] - **Quality Control**: Streamlining project selection and clearing inefficient projects to enhance business quality [5] Challenges and Industry Dynamics - **Community Value-Added Services**: Facing industry bottlenecks and declining consumer sentiment [6][7] - **Market Conditions**: The company is adapting to a challenging environment with a focus on core product categories and community needs [7] - **Real Estate Cycle Impact**: The company is cautious due to the real estate cycle and aims for steady growth while maintaining cash flow [9] M&A Market Insights - **M&A Opportunities**: Notable changes in the M&A market with attractive pricing in the 5 to 8 times range [10] - **Target Focus**: Core residential property management companies, state-owned logistics teams, and community value-added service companies [11] Technology and Innovation - **AI Applications**: Exploring AI in operational management and energy management to improve efficiency and profitability [14] - **Current Status**: Technology application is still developing, with plans to enhance efforts in 2025 [14] Conclusion - **Overall Strategy**: Poly Property is focused on maintaining financial health, enhancing shareholder returns, and navigating industry challenges through strategic project management and technology integration [9][14]