The report from "Big Banks" upgraded GREENTOWN SER's rating to "Buy," with a slight decrease in the target price to 5.1 yuan

HSBC Research published a report indicating that Greentown Service (02869.HK) achieved a profit growth of 12% last year, in line with expectations. Surprisingly, the net operating cash flow exceeded net profit by 60%. Management expects the gross profit margin to increase by another 0.5 percentage points this year, following a 0.5 percentage point increase last year. These changes alleviate market concerns about cash flow recovery pressures. Meanwhile, amid increasing macro uncertainty, the bank believes that the group's approximately 7% dividend yield is attractive and has high visibility, especially since the stock price has corrected by about 20% since the fourth quarter of last year, offering better risk-reward.

Management has set a clear goal for the accounts receivable balance growth rate to be lower than the revenue growth rate by 2026, demonstrating a commitment to improving cash flow. Although the rising proportion of non-residential projects may slow down accounts receivable turnover, it is expected to bring more revenue growth amid a slowdown in the total construction area expansion of residential projects. In the accounts receivable structure, individual customers account for 54%, an increase of 3 percentage points year-on-year, indicating that there is still room to enhance customer satisfaction and accelerate property management fee collection.

The bank has lowered the group's revenue forecasts for this year and next by 4% and 6%, respectively, to reflect slower-than-expected total construction area expansion and value-added service growth. It has also reduced the gross profit margin forecast by 0.2 and 0.1 percentage points, leading to a 4% and 5% reduction in profit forecasts. The target price has been lowered from HKD 5.4 to HKD 5.1, with a target price-to-earnings ratio of 13.5 times; the rating has been upgraded from "Hold" to "Buy."