Investment suggestion: The company has formed a “integrated forest board” development pattern. Currently, it operates 1 million mu of forest area, produces 15 million pine cedar seedlings per year, and has an annual production capacity of 450,000 cubic meters of fiberboard. The company's various projects in Pingtan are progressing in an orderly manner, and the benefits are initially reflected. Among them, Caicheng, China, Fujian Province was pre-sold in the second half of the year; the concrete project was put into production and sale; the “Wanbaoshan Park” BT project has been accepted and settled; the Pingtan Zhonghui Small Loan Company, which is the main sponsor, has shown benefits; and the company and the Taiwan Forestry Institute Group have won the bid for BT projects for the Jinjing Bay and Eastern Sewage Treatment Plants. We expect the company's EPS for 2014 and 2015 to be 0.11 and 0.48 yuan respectively. As of July 24, the company closed at 12.23 yuan, and the corresponding dynamic price-earnings ratios were 115.83 times and 25.44 times, respectively. Considering that in 2015, the company will fully benefit from benefits such as the expiration of forestry logging restrictions, the expansion of concrete production and capacity in Pingtan, BT project settlement, and the pre-sale of Caicheng in China Fujian Province, we have estimated that the company's reasonable stock price is 13.12 yuan/share according to the distribution method of the company's various businesses, giving it an “increase in holdings” rating for the first time. Main content: The construction of the Pingtan Free Port is in full swing. The Pingtan Comprehensive Experimental Zone, “Lan” for short, is located in the eastern part of Fujian Province, across the sea from Taiwan, and is the closest place in mainland China to Taiwan Island; the largest island in Fujian Province and the fifth largest island in China, with an area of 372 square kilometers and a population of 400,000. Pingtan was developed late, and large tracts of original architecture have been preserved on the island. In July 200****tan officially established the “Pingtan Comprehensive Experimental Zone” and changed its name to “Fujian Pingtan Comprehensive Experimental Zone” in 2010. In July 2013, Pingtan obtained the authority to establish districts and municipalities, and was transferred to direct management by Fujian Province. Pingtan has excellent natural conditions. Currently, the Pingtan coastline is 408 kilometers long, and there are 283 natural harbors and Macau, of which more than 10 sites of 10,000 to 300,000 tons can be built. Haitan Island, the main island of Pingtan, has 166 square kilometers of constructible land, plus 12 small islands to be developed, bringing the total developable area to 255 square kilometers, accounting for 68% of the total area. The east side of Pingtan is only 68 nautical miles from Hsinchu, Taiwan, and the north side is only 60 kilometers from Fuzhou Changle Airport. The Pingtan Strait Bridge and the Fuqing-Pingtan Expressway are under construction. The planned Beijing-Taiwan Expressway will reach Pingtan Island, and the Taiwan Strait Tunnel Northern Route Plan from Pingtan to Hsinchu, Taiwan, will form a complete integrated transportation network by sea, land, air, and port. In May 2009, the State Council issued “Certain Opinions on Supporting Fujian Province to Accelerate Construction of the West Bank Economic Zone of the Strait”, marking the elevation of Haixi construction into a national strategy, which provides an opportunity for Pingtan to accelerate development. The Fujian Provincial Committee and Provincial Government decided to build Pingtan into a demonstration zone for exploring new models of cross-strait cooperation and a pioneering zone for scientific development in the West Bank Economic Zone. We believe that the development and opening up of Pingtan Island will help improve the development layout of the western coast of the sea, the formation of a new open channel to the outside world (the terminal of the mainland section of the Beijing-Taiwan Expressway and the northern entrance to the Taiwan Strait Undersea Tunnel will be located on Pingtan Island in the future), and the construction of a new economic growth pole for the central city of the province (helping to gather various factors, especially Taiwan's capital, technology, and talents). The development of the Fuzhou (Pingtan) Comprehensive Experimental Zone is positioned as a demonstration zone for exploring cross-strait exchanges and cooperation and a pioneering zone for scientific development in the West Bank Economic Zone of the Strait. The goals for development in the near to medium term (2010 to 2015) are: the cross-strait integrated channel has been continuously improved, and the functions of cutting-edge platforms have become more prominent; the average annual growth rate of gross domestic product exceeds the average of the province; the infrastructure has improved markedly; and the initial formation of an emerging urban framework. The medium- to long-term goals (2016-2020) are: economic integration between the two sides of the Strait continues to deepen; the basic establishment of an international tourist island with cross-strait cooperation and a special cross-strait trade zone; take the lead in establishing an institutional mechanism conducive to scientific development; and take the lead in achieving the goal of building a well-off society in an all-round way. In the future, the Pingtan Experimental Zone will build a low-carbon economic island by actively undertaking industrial transfers in Taiwan, building advanced manufacturing bases, and developing modern industrial systems such as electronic information, marine life, and clean energy. The goal is to build an ecological garden city, and build a modern ecological island city. In the near future, Pingtan will focus on promoting the development of six major regions, including: industrial development zone, international tourism development zone, trade cooperation zone, modern logistics port area, science and culture industry zone, and urban development zone. Basic situation of the company: Strategic cooperation framework with the Pingtan Pilot Zone Management Committee The predecessor of Pingtan Development was Zhongfu Industrial Co., Ltd., which was approved for establishment in 1993. Listed on the Shenzhen Stock Exchange in 1996/3, code 000592. In 2007-2008, after major asset restructuring, the newly appointed majority shareholder Yamada Forestry Development (Fujian) Co., Ltd. injected high-quality forestry assets into the company and successfully resumed listing in April 2008. By the end of 2012, the company had a registered capital of 847 million yuan, and its business areas covered various industries such as real estate development, seedling cultivation, afforestation and forestry, processing and sales of forest products, garden landscape, pawnbroking and microfinance, and infrastructure construction. By extending and perfecting the upstream and downstream industries of modern forestry, the company has become one of the leading FSC-COC medium fiber board companies in China that can mass-produce SGS certified FSC-COC. The company has forestry business areas with a total area of more than 1 million mu in Jian'ou, Sanming, Mingxi, Zhangzhou, Longyan, etc., in Nanping, Fujian, and has the highest forest area among similar listed forestry companies. In March 2011, the State Council officially approved the “West Strait Economic Zone Development Plan”, and Pingtan, located in the “bridgehead” of Haixi, faces a strategic opportunity to accelerate development. In order to seize opportunities and participate in Pingtan development, in September 2011, the Pingtan Management Committee and the company formally signed a “Cooperation Framework Agreement” to support the company in carrying out landscaping and infrastructure projects within the experimental zone. In 2011/12, the Development and Reform Commission officially released the “Overall Development Plan for the Pingtan Comprehensive Experimental Zone”, which gives the pilot zone more favorable policies in terms of customs clearance models, fiscal support, investment access, financial insurance, cooperation with Taiwan, and land support. In 2011/12, the company moved its place of registration into the Pingtan Comprehensive Experimental Zone. In May 2014, the company changed its name to “Zhongfu Strait (Pingtan) Development Co., Ltd.”, and the stock abbreviation was changed to “Pingtan Development”, and the code remained the same. As the only A-share listed company registered in Pingtan, the company has undertaken a number of projects related to the Pingtan Experimental Zone, including: Zhongfu Plaza (Zhongfu Strait Building Materials City Project), the first phase of the 450,000-cubic meter concrete mixing plant with a total production capacity of 900,000 cubic meters and Taiwan Ronggong Engineering Co., Ltd., the “Pingtan Wanbaoshan Park” project undertaken by the company, and Pingtan Zhonghui Microfinance Co., Ltd. initiated by the company, Jinjing Bay in the Pingtan Comprehensive Experimental Zone, and the first phase BT project of the Eastern Sewage Treatment Plant. We believe that with the gradual implementation of these projects, the company will create a comprehensive development enterprise integrating “big forestry” and infrastructure engineering. Analysis of the development situation of the company's various businesses. In 2013, the company's various businesses developed steadily. During the reporting period, the company achieved operating income of 858 million yuan, an increase of 17.95% over the previous year; net profit for the whole year was 43.4786 million yuan, an increase of 262.03% over the previous year. Among them, sales of forestry products reached 71.62 million yuan, a year-on-year increase of 4.33%; fiberboard sales reached 575 million yuan, a year-on-year decrease of 4.71%; pawnbroking business revenue reached 12.49 million yuan, a year-on-year decrease of 19.31%; concrete sales reached 122 million yuan; and BT project construction revenue was 57.06 million yuan. 3.1 Forestry main business Currently, the company owns 1 million mu of forest area under management. In 2013, the company achieved an increase of 71.61663 million yuan in wood product sales, 4.33% more than the previous year; in the same period, the company sold 575 million yuan of medium fiber board, a decrease of 4.71% over the previous year. In 2013, the company achieved a gross profit of 201070 million yuan for timber products, an increase of 1.62% over the previous year; the gross profit of medium fiber board was 59.5884 million yuan, an increase of 10.55% over the previous year. We believe that in recent years, the company has been affected by the logging restriction order issued by Fujian Province in 2011 (since 2011, Fujian Province has strictly controlled the transformation of low-yield forests for 3 consecutive years), and its forest products and fiberboard business performance has been unsatisfactory. However, in the future, with the expiration of the logging restriction order in Fujian Province, it is expected that the company's forest products and fiberboard business revenue and profit will increase to a certain extent in 2014. 3.2 Zhongfu Strait Building Materials City Zhongfu Strait Building Materials City is one of the nine major construction projects in Pingtan. It is located within the Jinjing Bay Group, on the north side of Jinjingwan Avenue and the west side of Jinjing 1st Road, with a total investment of 1.3 billion yuan, a total land area of 801,000 square meters, and a total design area of 374,200 square meters, of which 304,200 square meters above ground and 70,000 square meters underground. The project will build a modern commercial complex integrating commerce, offices, and hotels. After completion, it will be the largest building materials shopping mall in the province. In August 2013, the company signed a “Framework Agreement on Commissioned Decoration and Management” with Red Star Macalline Home Furnishing Group, which entrusts Red Star Macalline Group to decorate and manage the third phase of the Zhongfu Plaza project. We expect that the project will achieve pre-sale of the first phase of the project in the second half of 2014. At that time, the positioning of Zhongfu Plaza's “International Home Furnishing Mall+ Business Exhibition Center+Strait Building Materials District+Boutique Fashion Hotel+Financial and Business Square+SME Headquarters” in the six gold product portfolios will quickly fill the gap in home building materials business in Pingtan. Furthermore, the company successfully introduced the Red Star Macalline brand, enhancing the commercial value of the Pingtan home furnishing market. We believe this project will be one of the main sources of the company's performance in 2015 and beyond. 3.3 Concrete mixing In April 2013, the company and Taiwan Ronggong Engineering Co., Ltd. jointly invested in the construction of a concrete mixing plant with a total production capacity of 900,000 cubic meters, and the first phase of the 450,000 cubic meter mixing plant was officially put into operation. It now provides high-quality commercial concrete for infrastructure construction in Pingtan, and sales conditions are good. In 2013, the company produced 310,000 cubic meters of concrete and achieved operating income of 122 million yuan (realized concrete sales of 310,000 square meters); in the same period, the company achieved gross profit of 282.11,800 yuan, with a gross profit ratio of 23.11%. We expect that in 2014, the company's revenue after delivery with full production capacity of 450,000 cubic meters will reach 177 million yuan, and that the post-production revenue of the second phase of the project will rise further to 345 million yuan. 3.4 The “Pingtan Wanbaoshan Park” BT project contracted by the Municipal Construction Company completed construction and acceptance in 2013. This will provide people in the Pingtan Comprehensive Experimental Zone with comprehensive public green space facilities integrating leisure, entertainment, fitness, and activities. In 2013, the company's BT project in Wanbaoshan Park contributed 57.056 million yuan in revenue to the company, achieving a gross profit of 9.6461 million yuan and a gross profit margin of 16.9%. In September 2013, the company and Taiwan Ronggong Institute coalition won the bid for the first phase BT project of Jinjing Bay and Eastern Sewage Treatment Plants. This will contribute to the company's performance in 2014-2015. 3.5 Financial sector In March 2013, Pingtan Zhonghui Microfinance Co., Ltd., initiated by the company, was officially approved and opened for business in July. As the first domestic limited company in the Pingtan Comprehensive Experimental Zone, Zhonghui Small Loan Company will facilitate financing for small and medium-sized enterprises in the Pingtan Experimental Zone. In 2013, the company's Zhongfu Pawn Broker's revenue was 124.8877 million yuan, a decrease of 19.31% over the previous year, mainly due to bank loan repossession in 2013; in the same period, the company achieved a gross profit of 107.229 million yuan, a decrease of 19.21% over the previous year. We believe that with the implementation of targeted easing policies this year, the company's pawnbroking business will remain stable. Company Performance Forecast and Investment Suggestion 4.1 Company Performance Forecast First, we forecast the sales and settlement situation of the Zhongfu Strait Building Materials City project, which has the greatest impact on the company's performance. We assume that the project will be successfully pre-sold in the second half of the year, and that partial settlement will be achieved next year. That is, in 2015-2016, the company's settlement area was 43,500 square meters and 761,000 square meters, respectively, while the company's settlement revenue in 2015-2016 was 869 million yuan and 1,597 million yuan respectively. In terms of other business, considering the elimination of logging restrictions, we assume that the company's forest product sales revenue growth rate will be 10% and fiberboard sales revenue will grow 5% in the next three years; pawnbroking business revenue will remain unchanged; considering that the current 310,000 cubic meter concrete production capacity will expand to 450,000 cubic meters and gradually expand production to 900,000 cubic meters next year, so we assume that the company's concrete business revenue growth rates for 2014-2016 will be 45%, 50%, and 30%, respectively. If the company undertook BT projects for the Kanjing Bay and Eastern Sewage Treatment Plants, can be accepted and settled within two years, it is assumed that the annual BT project construction revenue will increase by 30%. It can be seen from this that in 2014-2016, the company's operating income was 946 million yuan, 1,964 million yuan, and 2,841 billion yuan, respectively. Based on the above revenue and profit forecasts, in 2014-2015, the company will achieve net profit of 89.47 million yuan and 407 million yuan respectively, and EPS of 0.11 yuan and 0.48 yuan respectively. Based on the closing price of 12.23 yuan on July 24, the corresponding dynamic price-earnings ratios were 115.83 times and 25.44 times, respectively. 4.2 The company's valuation and investment recommendations can only be released considering the company's 2015 performance, so we take the company's PE valuation of about 0.48 yuan in EPS in 2015 (of which EPS for forest products and fiberboard sales, concrete sales, free trade zone commercial housing sales, and other businesses are 0.18 yuan, 0.06 yuan, 0.21 yuan, 0.03 yuan, respectively). At the same time, we take the average 2015 PE valuation of listed companies in the forestry, concrete industry, and free trade zone real estate industry as the company's 2015 PE valuation for the corresponding business in 2015 (15 times for other businesses) PE valuation), then it can be seen that the company's reasonable stock price in the secondary market is 13.12 yuan/share. The company has formed a “integrated forest board” development pattern. Currently, it operates 1 million mu of forest area, produces 15 million pine cedar seedlings per year, and has an annual production capacity of 450,000 cubic meters of fiberboard. The company's various projects in Pingtan are progressing in an orderly manner, and the benefits are initially reflected. Among them, Caicheng, China, Fujian Province was pre-sold in the second half of the year; the concrete project was put into production and sale; the “Wanbaoshan Park” BT project has been accepted and settled; the Pingtan Zhonghui Small Loan Company, which is the main sponsor, has shown benefits; and the company and the Taiwan Forestry Institute Group have won the bid for BT projects for the Jinjing Bay and Eastern Sewage Treatment Plants. We expect the company's EPS for 2014 and 2015 to be 0.11 and 0.48 yuan respectively. As of July 24, the company closed at 12.23 yuan, and the corresponding dynamic price-earnings ratios were 115.83 times and 25.44 times, respectively. Considering that in 2015, the company will fully benefit from benefits such as the expiration of forestry logging restrictions, the expansion of concrete production and capacity in Pingtan, BT project settlement, and the pre-sale of Caicheng in China Fujian Province, we have estimated that the company's reasonable stock price is 13.12 yuan/share according to the distribution method of the company's various businesses, giving it an “increase in holdings” rating for the first time. The risk suggests that the real estate industry in which the company is located is closely related to national policies. Once the country adopts more stringent regulatory measures in the future, it will directly affect the company's future development.