Event comment

First, the decrease in gross profit margin in the third quarter is mainly due to the reconstruction and maintenance of the old bridge on the old road of Zhengzhou.

The company's gross profit margin in the third quarter decreased 6.4 percentage points compared with the second quarter, mainly due to the reconstruction and maintenance of the old bridge in the Zhengzhou section of the Beijing-Hong Kong-Macao Expressway. As the four-expansion and eight-expansion and expansion project of Zheng-Luo Expressway is scheduled to be completed and opened to traffic by the end of this year, in order to make the old Zheng-Luo road have the same road condition, service level and service life as the new widening. The company began to carry out reconstruction and maintenance of the old bridge on Zheng Luojiu Road in September this year, with an estimated investment of 856 million yuan, and the reconstruction was completed by the end of December. This project increased the company's operating costs such as road maintenance in the third quarter, resulting in a decline in gross profit margin in the third quarter.

Second, there is great downward pressure on the results in the fourth quarter.

The company's performance will decline sharply in the fourth quarter from the previous quarter, mainly due to:

(1) the settlement of road maintenance projects and the payment of employees' bonuses are generally concentrated in the fourth quarter, resulting in a significant decline in the company's profitability in the fourth quarter.

(2) the cost of reconstruction and maintenance of the old bridge on the Zheng-Han section of the Beijing-Hong Kong-Macao Expressway.

(3) the Zhengxin Yellow River Bridge was completed and opened to traffic on September 29th this year, with a total length of 22.89km, with a total estimated investment of 2.93 billion yuan and depreciation over 30 years, which will increase the expenditure on depreciation and financial expenses in the fourth quarter.

Third, the intensive completion of projects under construction will reduce the performance of next year.

Following the completion and opening of the Zhengxin Yellow River Bridge, the new construction of the Shangqiu section of the Yonghao Expressway and the reconstruction and expansion of the Zhengzhou section of the Beijing-Hong Kong-Macao Expressway will also be completed at the end of November and December this year. The total investment of the three projects is 8.3 billion yuan, accounting for 35% of the capital. the depreciation and financial expenses carried forward after completion will offset the performance in 2011.

Fourth, the settlement of real estate projects and the listing of venture capital projects are the bright spots of the company's future performance.

Henan Yingdi Real Estate, which is controlled by the company, obtained an area of 131.66 mu of residential land in Phase II of the Provincial Academy of Agricultural Sciences at a price of 400 million yuan (that is, 3.042 million yuan per mu) on January 28, 2009. this residential land is known as "golden lot" and "scarce land". It is located between the main roads of the four major cities of Garden Road, Culture Road, Agricultural Road and Dongfeng Road. To the north is the scenic Dongfeng Canal landscape belt, to the west is the Henan science and technology market known as "China's Silicon Valley", and to the south there is about one bus stop, such as Dennis and the zoo, and it is close to the provincial experimental middle school. the surrounding business and educational resources are rich. With the expansion of the city, the value of this land has doubled. At present, Yingdi Real Estate has used the residential land to create a high-quality Tianjiahuating project in the city, with a total construction area of about 300000 square meters, composed of 16 high-rise residential buildings with 18 to 33 floors, with a community greening rate of 56% and a building density of 22%. The project has been pre-sold in the third quarter, and the current average price is 8500 yuan per square meter. It is expected that the settlement income in 2012 will increase the EPS by about 0.25 yuan.

Dalian Yishida New Energy Co., Ltd. (stock code: 300125), invested by Beijing Bingyuan Venture Capital Company, a wholly-owned subsidiary of Zhongyuan Expressway, successfully listed on the gem on October 13 this year at an issue price of 55 yuan per share. the price-to-earnings ratio is 89.72 times. It is reported that on September 21, 2009, Bingyuan Venture Capital invested 8 yuan per share in Dalian Yishida, and after the capital increase, it respectively held 1.5 million shares, accounting for 3.41% of the company's total share capital (44 million shares) before the issue. According to the issue price of 55 yuan per share, the original venture capital book exit amount is 82.5 million yuan, the exit rate of return is 5.88 times. Yi Shida listed on the first day, adhering to the original venture capital holdings reduced by 532800 shares, if calculated according to the issue price, corresponding to the realized investment income of 29.3 million yuan.

Bingyuan Venture Capital also has many investment projects, such as Kirin Game, Henan Yuhua, Hengjiqin, Wanrun Chemical, Beijing Huifeng, Dalian Xuelong, Zhongdi breeder, Xingtai Science and Technology, Luhua Chemical, Jujube Industry, etc., among which Wanrun Chemical will be on September 6 this year, but the listing in the later stage of the venture capital project is still the main focus of the company's performance.

Fifth, we are optimistic about the company's long-term development prospects, and we upgrade the company's rating to "cautious recommendation".

The company is now in a period of scale expansion, new construction and expansion projects continue to bring pressure on the company's performance, but the completion of these projects is conducive to the expansion and strength of the company's main business; with the implementation of the revitalization plan of the Central Plains Economic Zone, the process of industrial transfer and urbanization in the Central Plains has been accelerated, the density of logistics and people in the region has increased accordingly, and the company's main business will enter a rapid upward channel. At the same time, diversified expansion can thicken the company's performance, and we are optimistic about the company's long-term development prospects. Considering venture capital and real estate earnings, the company raised its EPS from 2010 to 2012 to 0.29,0.32 and 0.59 yuan, corresponding to PE14, 13 times and 7 times, and upgraded the company to "cautious recommendation".