From the 2024 financial report, looking at the strategic clarity behind SHIMAO SERVICES (00873) "Giving Up" and "Gaining"

In the year 2024, a year of deep adjustment in the real estate industry, the "independent external expansion capability" of property management companies has become the focus of market attention. With the real estate industry still showing signs of adjustment as a whole, entering a new cycle of destocking, the development logic of the property management services industry is also undergoing a transformation. As the growth model driven by new projects in the past is no longer sustainable, the survival logic of property management companies has fundamentally changed. The ability for independent external expansion, cost reduction, and value-added services disruption capability have become the key determining factors for the growth and survival of companies in the next phase. In a year when the property management services industry enters a competition for "high-quality survival capabilities," SHIMAO SERVICES (00873) still delivered a resilient performance in 2024. Contrary to the overall trend, the property management business of SHIMAO SERVICES became the highlight of their financial report: In 2024, SHIMAO SERVICES' property management services achieved revenue of 5.564 billion yuan, a year-on-year growth of 5.1%, with the proportion of total revenue increasing to 70.5%. The gross profit margin also remained stable at 20.1%. Within the year, the company's third-party bidding for external expansion not only achieved new highs but also built a sustainable momentum for its own development in fierce market competition, steadily moving towards higher goals. In 2024, SHIMAO SERVICES achieved a third-party external expansion with a new contract value of 1.483 billion yuan, a year-on-year increase of 28.2%; an increase in new contract construction area of 431 million square meters, a year-on-year increase of 3.4%; and an increase in average property management fees for new projects to 2.9 yuan/square meter/month, a significant increase of 26.1%, achieving a simultaneous increase in quantity and price, significantly optimizing the quality of external expansion. In terms of regional layout, SHIMAO SERVICES adopted a high-energy city density strategy: by the end of 2024, as much as 74.4% of SHIMAO SERVICES' projects were located in first-tier, new first-tier, and second-tier cities, with a residential format accounting for 63.9%. The regional layout is high-quality, targeting high-net-worth customers and providing potential for value-added services. As the property management industry shifts from "scale expansion" to "quality competition," SHIMAO SERVICES chooses to evaluate project conditions comprehensively at the screening stage, laying a solid foundation from the source to ensure efficient operational management and overall profitability after project delivery. By focusing on advantageous regions and operating intensively within each region, the company aims to create excellent projects in every deep-rooted area, thereby enhancing its brand influence and market share. This "picking the best from the best" strategy not only improves the quality of income but also establishes a foundation for high-net-worth customer groups in communities, reconstructing the valuation logic of the property management industry. Asset optimization and strategic focus: Exiting inefficient targets, increasing investment in technology transformation To deal with industry uncertainties, in 2024, SHIMAO SERVICES proactively adjusted its asset structure, exiting inefficient targets, and increasing investment in technology transformation to reduce costs and increase efficiency. For example, in 2024, SHIMAO SERVICES divested its 60% stake in Wuxi Jinshatian Technology, retrieving 250 million yuan, reducing the pressure of impairment of goodwill, and actively exiting projects with low-profit margins and long account payables, thereby reducing the drag of long account payables and low-profit projects. While dealing with low-efficiency assets, SHIMAO SERVICES is also actively shifting its strategic focus towards technology-driven operations to improve management and operational capabilities and maintain a stable gross profit margin. Currently, SHIMAO SERVICES plans to achieve intelligent management through AI and big data, accurately control business processes, assist in stable equipment operation, reduce management costs, increase operational efficiency, and provide higher quality personalized services and a more convenient service experience to customers based on a deep understanding of customer preferences. In terms of cost reduction and efficiency improvement, during the reporting period, the company's employee costs decreased by 12.9% year-on-year, achieving management efficiency improvement through organizational structure flattening; administrative expenses decreased by 16.4% year-on-year, achieving cost savings through expense control and system optimization. The overall results of cost reduction and efficiency improvement are significant. As of the end of the reporting period, the company still holds cash and cash equivalents (including time deposits) of 3.76 billion yuan, with controllable liquidity risks. As SHIMAO SERVICES narrows its focus, prioritizing technology investments and enhancing its differentiated service capabilities, it is expected to accumulate long-term competitiveness in the next cycle. Emerging in the new layout, the potential for revaluation is expected Against the backdrop of a general decline in real estate-related businesses (such as parking space sales and MeiJu services), the growth in demand for elderly care has brought new opportunities for property management companies. In 2024, with traditional value-added services under pressure, elderly care services became the highlight of SHIMAO SERVICES' value-added services sector: During the reporting period, SHIMAO SERVICES achieved a 15.1% year-on-year growth in revenue from elderly care services, reaching 187 million yuan, becoming the new growth point in the value-added services sector; Chuxi Hall achieved rapid revenue growth by expanding into new markets such as Zhoushan, Zhejiang and leveraging group resources. As the company further enters tracks such as community elderly care services and pet services, leveraging the advantage of property access to tap into the "last mile" consumer potential, by naturally being close to community scenes, through the combination of "rigid property management + flexible value-added services," SHIMAO SERVICES is expected to seize the initiative in the aging population and consumption upgrading trends. Despite the challenging industry environment, SHIMAO SERVICES has demonstrated strong risk resistance and strategic adjustment capabilities through deepening its core business, reducing costs, optimizing assets, and making forward-looking layouts, laying a solid foundation for future recovery and differentiated competition. Looking ahead to 2025, the company proposes four key battles around "income scale, cost control, quality improvement, and management enhancement." In terms of income, SHIMAO SERVICES also proposes the battles of "retaining, increasing, and expanding" income.Briefly, focus on customer retention and enrich value-added service business types, maximize unit space output, actively explore the market, break through market boundaries, and achieve continuous expansion of business scale.In the current situation where valuation in the property management industry is under pressure, the financial report of SHIMAO SERVICES shows the prototype of a property management enterprise's "counter-cyclical model". If the future new track layout and efficiency improvement strategy continue to be realized, the company may have the opportunity to undergo value re-evaluation after the industry consolidation.