Morgan Stanley: Mainland property management companies performed largely in line with expectations last year, with CHINA RES MIXC (01209) and GREENTOWN SER (02869) expected to see the highest profits growth.

Morgan Stanley's research report predicts that the overall performance of mainland property management companies covered last year should generally meet expectations, with profit growth in the low single digits, but with increasing differentiation. Among the companies covered, GREENTOWN SER (02869) and CHINA RES MIXC (01209) are expected to achieve the highest profit growth (up 10% to 15% year-on-year), followed by POLY PPT SER (06049) and CHINA OVS PPT (02669) (up in the mid single digits). SUNAC SERVICES (01516) may still face core profit decline due to past receivables issues and non-core business drag. However, except for ONEWO (02602), the risk of impairment from related parties has been largely cleared. Morgan Stanley states that leading companies continue to benefit from third-party market consolidation, but weak cash collections remain a major obstacle. Despite increasing competition, most property management companies still achieve their full-year expansion targets, highlighting the huge long-term market potential. However, due to a decrease in resident prepayments and an increase in high vacancy rate projects to be delivered after 2022, the cash collection ratio last year decreased by 1 to 2 percentage points year-on-year. Morgan Stanley believes that short-term profit margins for mainland property management and service companies are still under pressure, but as leading project management companies exit low-quality and non-core projects to optimize their business portfolio, annual operating cash flow should remain at around 1 times profit. The continued reduction in third-party receivables losses remains a key driver of profit differentiation for various property management companies.