On July 26, Citi released a quick review of the property management industry, which mentioned the following valid information:
1. The country's recent property management policy aims to standardize and make property management transparent, but it has not changed the country's support for property management. The “Notice on Continued Remediation and Standardization of the Real Estate Market Order” issued by eight departments including the Ministry of Housing and Construction states that 1) property management companies are required to provide management services in accordance with the quality of service specified in property contracts; 2) they must disclose property fees and maintenance expenses managed by private and public business formats; and the “Guiding Opinions on Maintaining Labor Security Rights and Interests of Workers in New Forms of Employment” jointly issued by eight ministries and commissions states that property management companies need to provide social security and benefits to outsourced service personnel.
2. In the long run, providing social security will not cause property companies' valuations to drop significantly. In the worst case scenario, providing social security and benefits to outsourced service workers will only cut property company profits by 6% (assuming that the outsourced employees of the property management company account for 37% of the total number of employees, while the property management company is responsible for 100% of the social security expenses of outsourced workers), which will only reduce EPS levels by 6%.
3. Investors place too much emphasis on the impact of developers' deleveraging on property companies' profits. Since developers provide an average of 23% profit to property companies through value-added services for non-owners, etc., assuming that both have a CAGR of 0 starting in 2022, this will only reduce profits by 4% in 2023 and reduce the area under management by 2% starting in 2024.
4. Citi reaffirms its previous judgment: 1) The country incorporated property management into the five-year plan and formulated a development summary, which shows that the country still attaches importance to property management...