We believe there will be a substantial turnaround in the company's operations, and there will be a significant increase in performance over the next few years. There are two main reasons: first, the project resources reserved by the company are of high quality, the cost is low, and the profit margin is huge; second, the company's development projects will enter a harvest period one after another and can continue to contribute profits.
The company's main development projects include the Guangzhou Chigang Pearl River New Bank Project, the Guangzhou Pearl River New Town Project, and the Changsha Pearl River Flower City Project. The total equity reserve area is as high as 1.24 million square meters, while the company's total share capital is only 188 million yuan. The Guangzhou project, which has a low cost and huge profit margin, will be the main contributor to performance, while the Changsha project can guarantee the company's continued development for the next three to five years.
Guangzhou Pearl River New Bank and Changsha Pearl River Huacheng Group 2 “Fushuian” are expected to open in the third quarter of this year, while the Guangzhou Pearl River New Town project is expected to begin in 2008. Based on our more conservative sales prices, the total net profit of the three major projects can also reach about 780 million yuan, which is equivalent to 4.18 yuan per share. The three projects will start contributing revenue at the same time, which will bring about explosive growth in performance. We expect the company's earnings per share in 07-09 to be 0.15 yuan, 0.90 yuan, and 1.85 yuan, respectively.
In addition, Zhujiang Industrial Group, the majority shareholder of the company, also has many high-quality commercial real estate and real estate development projects. We believe that in the future, it is likely that assets will be injected through targeted additional distribution, thereby increasing the shareholding ratio of the majority shareholders and enhancing the company's ability to continue to operate.
Whether according to the expected dynamic P/E or P/B valuation, the company's current stock price appears to be relatively low. We believe that the company's target price range for 6 months is 16-18 yuan, giving it a “buy” rating.