Main points of investment
Restricted stock incentive award is completed, deep ploughing in Chengdu will help to realize the performance. The company launched stock options and restricted stock incentive programs in February 2016, of which restricted shares were granted on June 17, 2016. In this incentive plan, the exercise condition of the stock option is the same as the unlocking condition of the restricted stock. The performance condition of the exercising / unlocking company is based on the average annual net profit belonging to the shareholders of the listed company in 2013, 2014 and 2015, deducting the non-recurring profit and loss, and the net profit after deducting the non-recurring profit and loss belonging to the shareholders of the listed company in 2016 and 2017. The growth rates relative to the above-mentioned three-year average performance benchmark are not less than 8% and 16%, respectively. After years of deep ploughing in Chengdu market, the company has accumulated extensive resources and strong strength through primary and secondary land development, and has broad prospects for development. We believe that the company's in-depth layout in the Chengdu market will help to meet the equity incentive performance requirements.
The company has been deeply cultivated in Chengdu for many years and has a wide range of contacts and strength. At present, there is not much real estate business, but the continued access to high-quality first-class land development projects have shown the strong strength of the company. The company's current development projects and proposed development projects are located in Xipu Town, Pixian County, with a superior location, which belongs to the suburbs of Chengdu closest to the central urban area, coupled with favorable factors such as subway, with the implementation of various policies and measures of real estate destocking in Chengdu, the sales prospect is good. The Mianshi Xidiwan project is a representative work of the company and is nearing completion. In 2015, the company acquired two land reserves through acquisition, with a total land area of about 74724.2 square meters, with a superior location, which needs to be changed into residential land for development by paying land transfer fees in the future.
Deeply ploughing the Chengdu market, the first-level land development lays the foundation of the Chengdu market. In 2005, the company's main business strategy transformed to the first-level land development, the main development project is Baohe Township, Chenghua District, Chengdu City, the project is only 6 kilometers away from the center of Chengdu, convenient transportation, the project location is very superior. Many years of first-level land development experience has enabled the company to have a profound insight into the laws of the Chengdu market, and has accumulated profound land development experience and real estate industry resources, laying a solid foundation for the company's future development in the Chengdu market.
Investment advice: the company is a typical "small and beautiful" company with no interest-bearing liabilities on its books, plenty of cash and a high margin of safety. At present, the equity incentive of the company has been awarded and completed, and the incentive intensity is fully in place. We believe that the company has great potential for future development, especially the strong strength accumulated in Chengdu for many years will help the company to achieve its performance goals. It is estimated that the EPS from 2016 to 2018 will be 0.25,0.29,0.35 yuan respectively, and the corresponding PE will be 51.4,44.3 and 36.7 times respectively.
Risk tips: real estate project sales are lower than expected; diversification business progress is lower than expected.