The company is the largest developer and operator of Shanghai Jinqiao Deputy Center. Jinqiao City Sub-Center is not only one of the three key development areas of the Golden Central Belt in Pudong New area of Shanghai during the 14th five-year Plan period, but also one of the 9 main city deputy centers in Shanghai. Jinqiao area, as an established development zone, has become a resource gathering area of core industries in Shanghai. As the main development operator in this area, the listed company Pudong Jinqiao has rich experience in production-city integration construction and operation. In 2021, the company's income reached 4.62 billion yuan, and the net profit returned to its mother was 1.62 billion yuan. In the past five years (2017-2021), the compound growth rate of income was 28.9%, and the compound growth rate of net profit was 21.8%.
Sitting on Jinqiao core production city resources, operational efficiency continues to improve. The company has rich and high-quality production city resources in Jinqiao area, including residential, office buildings, R & D buildings, commerce, factories and warehouses, culture and education, etc., and is expected to benefit from the great development of REITs in the medium term. By the end of 2021, the company holds 3.02 million square meters of property, with an income of 1.82 billion yuan. The agglomeration of new industries in Jinqiao region, including 5G industry, biomedicine, smart manufacturing, etc., is the epitome of Shanghai's industrial upgrading, while the company's efficient operation has brought about a continuous increase in rental rate and gross profit margin. At the end of 2021, the rental rate reached 84%, an increase of 3.3 percentage points over the previous year; gross profit margin was 56.9%, an increase of 2.9 percentage points over the previous year. In addition, by tapping the value of regional industrial resources, industrial fund investment and property management services will become a new growth point of the company in the future.
High gross margin projects ensure profit growth, and the great development of Lingang area promotes the expansion of the company. At the end of 2021, the company made efforts in the port area and acquired three new homesteads outside the Jinqiao area, achieving a new breakthrough in the development of the city. Together with the remaining settlement resources of the Biyunzun residence project with a gross profit margin of 75%, the outstanding value of the company is about 20.85 billion yuan, which is nine times the settlement income in 2021, providing sufficient protection for future performance growth.
Cover for the first time to give a buy rating, with a target price of 19.36 yuan. We predict that the company's EPS from 2022 to 2024 will be 1.76, 2.12, 2.53 yuan respectively, and the three-year CAGR will be 20.5%. Given the 2022 11x PE valuation, we believe that the company's reasonable target price is 19.36 yuan, giving a buy rating.
Risk tips: repeated adverse effects of the epidemic; sales and settlement are not as expected.
