Continue to bear fruit from efficiency gains

Continue to bear fruit fromefficiency gains Greentown Service’s FY25 net profit (NP) grew 12.1% YoY to RMB 880mn,missing Bloomberg consensus by 6.3% and in line withour forecast. Coreoperatingprofit(=GP-SG&A)rose 24.6%YoY,largely beating the 15%guidance set by management earlier thanks to its continued efforts on efficiencyimprovement.Share price went up 6.5% after analyst briefing given companyguided a >15% core OP growth in FY26 with further efficiency improvement aswell asthehigh payout ratio to be maintained. We maintain BUY and trim TP by1% to HK$6.55based on18x 2026E P/E,andwecut target P/E multiple from22x to 18x (c.20% discount) to reflectthe climbing new home vacancy rate thatresultsfrom weak property sales, which we think is likely to weigh on collectionrate of the industry in the next few years.Efforts on efficiency improvement yielded strong results.The Target PriceHK$6.55(Previous TPHK$6.61)Up/Downside53.7%Current PriceHK$4.26 China Property Management Miao ZHANG(852) 3761 8910zhangmiao@cmbi.com.hk company'scontinued efficiency improvement measures drove a grossmargin lift of 0.5ppts YoY (to 17.3%) and a SG&A ratio cut of 0.9ppts YoY(to 7.5%) in FY25, which totally saved RMB263mn and contributed 70% ofthegrowth in core operating profit.Core OP surged 24.6%YoY toRMB1,878mn, largely beating management's 15%guidance. This alsoleaves sufficient space for its heavy impairment, 121% higher YoY than theprevious year, and delivered a 12.1% YoY increase in NP, representing a0.2pptsexpansion in NP margin.Weexpectthis trend to sustain, as thecompany’s progress comes not from mere layoffs, but from a combination ofrefined management, cross-project collaboration, technology empowermentand focus on high-quality businesses. Its headcount increased 7% yet netprofit per capita rose 5%in FY25. Stock Data New homePMfee collection remains a future concern. The companydid not disclose its overall collection rate. Our calculation points to a milddecline,whichcausesworries given its mention of elevated vacancy ratesfornewly-delivered projectsin FY25, heavily affected by the slowdown inproperty sales. Meanwhile,we see the share of net new GFA undermanagement contributed by related partiesrisefrom 19%in FY24to 27% inFY25.We expect persistent high vacancy due toweak new home sales tocontinueover the next 1–2 years with no viable near-term solutions.Consequently, pressure onPMfee collectioncouldpersist and become themain drag in the coming years, potentiallydampeningthe sector’s medium-term growth outlook.FY26 guidance is beyond market expectation.The company guided >15% core OP growth in FY26 with gross margin to expand a further 0.5pptsand administrative fee ratio todrop bya further 0.5ppts. This opens up roomfor market optimism on the company’sefficiencyimprovement outcomes.Coupled with the company stating it will maintain a high dividend payoutratio, its share pricejumped 6.5%after analyst briefing while the HSIdeclined 3%. Source: FactSet Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifiesthat with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is,or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securitiesand Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business daysafter the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852)3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Impor