CCNL delivered solid results with net profit +82% YoY, beating consensus/CMBI estimates on VAS acceleration (+119% YoY) thanks to new businesses and growing tenant base. The Company guided revenue/NP to grow by 50%/40% three-year CAGR, which we think is reasonable given visible GFA expansion and strong VAS momentum. We revise up 2021E/22E earnings by 13%/16% and maintain BUY.
- 2020 earnings beat on VAS acceleration. CCNL’s managed GFA grew 100mn sq m in 2020 from 57mn in 2019. Revenue was up 51.3% YoY to RMB2,655mn driven by Community VAS + 119% and basic PM +45%. GPM declined by 0.4ppt YoY to 32.4% due to COVID impact on the commercial segment. Net profit grew 82% to RMB427mn, beating consensus/our estimates. The Company declared a dividend of HK$0.18/share, representing 60% payout ratio for entire 2020.
- VAS could maintain strong momentum. Community VAS revenue was RMB624mn, contributing to 23% of revenue, thanks to 1) RMB 71mn from new move-in business, 2) RMB 94mn in service fees (+100% YoY) for consumers club members, and 3) +102% revenue (to RMB364mn) in intelligent community business. Although 2020 results benefited new services, we think CCNL is likely to maintain strong momentum in VAS given 1) CCNL’s fast and visible GFA expansion with contracted/managed GFA ratio of 1.87, and 2) possible breakthroughs in community retail given 3.7mn registrations (+68% YoY) on Jianye+ platform; 3) post-COVID recovery of commercial/tourism segments.
- Company guides revenue/NP to grow by 50%/40% three-year CAGR. In terms of GFA expansion, CCNL plans to increase its expansion radius from 300km to 500km from Zhengzhou, to areas away from Henan where CCNL has less influence. Mgmt has confirmed ~RMB2bn cash on hand post-dividends to support future M&A efforts, potentially as a way to enter into new regions. As for earnings, Company guided 50%/40% revenue/NP CAGR for next three years.
- Raise earnings forecast in 2021E/22E by 13%/16%. We revise up 2021E/22E earnings by 13%/16% on strong VAS outlook and fast and visible GFA expansion. Currently CCNL trades at 8x 2022E P/E which is quite attractive, especially given that CCNL is a medium-sized player in terms of GFA. Raise TP to HK$12.9 reflecting 15x 2022E P/E. Maintain BUY.
