Main points of the report

Event description

Wolong Real Estate announced today's 2016 semi-annual report, the main contents are as follows: in the first half of 2016, the company achieved operating income of 724 million yuan, an increase of 7.83% over the same period last year, a net profit of 49 million yuan, an increase of 4.52% over the same period last year, and a net profit margin of 6.79%, down 0.22% from the same period last year, EPS0.07 yuan. Among them, the operating income in the second quarter was 400 million yuan, an increase of 6.49 percent over the same period last year, the net profit was 31 million yuan, up 15.56 percent over the same period last year, and the net profit margin was 7.72 percent, up 0.61 percent from the same period last year, and EPS0.04 yuan.

Event comment

Sales are good, and revenue is at a record high. The company adheres to the principle of eliminating inventory first. In the first half of 2016, the sales area and sales increased by 35.65% and 32.15% respectively compared with the same period last year, and the sales exceeded 1 billion yuan. Driven by the good sales in the early stage, the company achieved an operating income of 724 million yuan in half a year, a record high. At present, the company is mainly selling "Ink Lakeside" and "Lijing Bay" projects in Wuhan. The above two projects contributed more than 73% of the operating income in the first half of 2016, and the sales situation will continue to benefit from the high heat of the property market in Wuhan.

When the short-term debt is paid off, the cost of newly granted credit is reduced. At the end of the reporting period, the company's asset-liability ratio fell to 59.33%, the real debt ratio dropped to 48.07%, and the debt level was much lower than the industry average. In the first half of the year, the company repaid 627 million yuan of high-cost trust and project loans ahead of schedule, the balance of short-term loans at the end of the reporting period and non-current loans due within one year were zero, and the company obtained a new bank credit with a lower cost of 750 million yuan. help the company reduce financing costs.

It is planned to acquire Merin Technology and enter the game industry. The company issued a major asset restructuring plan to acquire a 97.7% stake in Merin Technology, with a preliminary transaction price of 4.41 billion yuan. The main business of Merin Technology is the research and development and authorized operation of online games. After the completion of the transaction, the company will be transformed into a listed company with both real estate development and online games. This acquisition is proposed to adopt the transaction method of issuing shares and paying cash, of which 2.103 billion yuan is paid in cash, the share issue price is 6.32 yuan per share, and 2.136 billion yuan is raised at the same time. At the same time, Merin Science and Technology performance compensation obligor promised that the net profit of Merin shares in 2016,2017 and 2018 would not be less than 3.60,4.50 and 563 million yuan.

Investment advice: benefiting from the good sales of the main real estate industry, the company has a strong driving force for performance growth this year, actively transforming the game industry and creating a "real estate + game" double main business. Without considering the acquisition for the time being, the EPS is expected to be 0.11 yuan per share in 2016 and 0.12 yuan per share in 2017, with a "buy" rating of 75.60 and 67.71 times the previous share price PE for the first time.

Risk hint: the heat of the property market is declining and the restructuring is uncertain.