Tianchen shares have not added new land reserves since 2010, as a result, the main real estate industry has almost stagnated, and business income has plummeted. In recent years, it mainly depends on investment income to support performance, and the company's business transformation is imminent and imperative. Since the beginning of 15 years, the company has tried three transformations in IT, environmental protection and education. At the same time, it has also recruited a team of professional executives to help with the transformation. Although the transformation has not been successful at present, it shows that the transformation is firm. At the same time, the conditions for the company's transformation are better: in recent years, the company has maintained a low debt ratio of 10-30%, has no interest-bearing liabilities of 400 million yuan in cash on hand, and has two cash assets with a value of 8.8 billion yuan, including Greenland equity and Minhang projects. will provide strong financial support for the transformation and development. In addition, in the middle of 15 years, Guohua Life Insurance raised its license three times in a short period of time, indicating that the value of the company is recognized by the risk capital. at the same time, the investment of the risk capital will also improve the shareholder structure and supervise the transformation. In view of the higher-than-expected investment income during the reporting period, we raised the company's earnings per share forecast for 2016-18 to 0.07,0.07 and 0.08 yuan respectively, maintaining the target price of 14.11 yuan and maintaining the buy rating.

Support the main points of rating

The main business of real estate has been stagnant for many years, and business transformation is imminent and imperative. After the company sold Rose Square for 10 years, it did not replenish the land reserve in the past 6 years, and transferred the Hebei project (25.5% equity) and cancelled the Suzhou project (35% equity) in 14 years. After that, the company's main real estate business almost stagnated. The operating income also dropped sharply from 1.5 billion yuan for 10 years to 40 million yuan a year, while the profit was only about 50 million yuan. And mainly comes from the investment income, including the dividend of greenfield equity and the sale of financial equity. In the first half of 16 years, the operating income was 22.51 million yuan, the net profit was 53.29 million yuan, and the earnings per share was 0.08 yuan, of which the performance mainly came from the dividend of 55.67 million yuan in greenfield and 12.64 million yuan from the sale of Junwei shares, but the problem of stagnation in the main business still existed, and the transformation was necessary.

Actively try business transformation, repeated failures prove that the will for transformation is strong. In 2015, the company actively promoted the transformation, successively: 1) joined Tang Jun at the beginning of the year to join hands with Tang Jun to try out the IT industry; 2) failed to reorganize and acquire environmental assets from September to December in 15 years; 3) recruited senior management team from international vision to help with the transformation; 4) suspended trading and restructuring in July 16, but failed again due to valuation problems. Although the company's transformation has not been successfully landed at present, it shows that the transformation is firm. At the same time, the company has good assets and favorable transition conditions: 1) maintain a low debt ratio of 10-30% in recent years; 2) have 400 million yuan in cash on hand and have no interest-bearing liabilities; 3) the company has two easy-to-realize cash assets worth 8.8 billion yuan.

Risk capital three times raise the license plate to recognize the value, improve the shareholder structure, and supervise the transformation. From July to August in 15 years, Guohua Life Insurance raised its shares three times in succession, holding 15% of its shares, becoming the second largest shareholder, with an estimated average price of 10.21 yuan per share, indicating the recognized value of the company. at the same time, raising the license also has two positive meanings for the company: 1) to change the situation of one controlling shareholder and supervise the transformation as two shareholders. 2) replace the original Shanghai Exhibition Center and Shanghai Milk Group not as state-owned shareholders, effectively exercise the rights of shareholders and improve the overall efficiency of the company.

Greenland equity and Minhang project increased by 8 billion yuan, and the company's NAV reached 8.8 billion yuan. 1) Minhang project: the company owns 400 mu of Minhang southern logistics park land (commercial nature, 85% equity), the book value is only 26.93 million yuan, the estimated floor price is 10000-12000 yuan / square meter, according to 2-12000 times the volume ratio, the revaluation and appreciation of the rights and interests of the land is about 5 billion yuan 2) Greenland equity: the company currently holds 278 million shares of Greenland Holdings, accounting for 2.29%, and the investment cost is only 34.28 million yuan. Considering the greenfield market value of 120 billion yuan and NAV 182 billion yuan, the equity has been revalued and increased by about 3 billion yuan. Coupled with the deduction of fair net assets of 800 million yuan, the company's NAV reached 8.8 billion yuan, corresponding to 12.8 yuan per share.

Main risks faced by rating

The valuation of Greenland Holdings has shrunk; the progress of the southern logistics park is slow; the transformation is lower than expected.

Valuation

In view of the higher-than-expected investment income, we raised the company's earnings per share for 2016-18 to 0.07,0.07 and 0.08 yuan respectively, maintaining the target price of 14.11 yuan and maintaining the buy rating.