Main points of investment

Event

1. Recently, the company has completed the fixed increase, and the funds raised have deducted 1.98 billion yuan from the net issuance expenses, and all the funds raised have been used to increase capital to the holding subsidiary Guangdong Pearl Group Urban Operation and Development Co., Ltd.

2. Recently, the company announced its participation in the joint investment in the development projects of "Classic City" and "Honggui Garden".

The completion of the fixed increase will promote the smooth progress of the PPP project.

According to the fixed increase plan, the number of shares issued is 1.25 billion shares, the issue price is 15.99 yuan per share, the fund raised is 2 billion yuan, the net amount is 1.98 billion yuan after deducting the issuing expenses, and the lock-up period is 36 months. The target of the issue is the first three major shareholders (concerted actors) of the company, through which the major shareholders and their concerted actors account for 41.49% of the total share capital of the company, further strengthening equity control and demonstrating the confidence of major shareholders in the future development prospects of the company.

According to the additional issuance plan, all the funds raised will be used for the first-stage land development of the new town in the south of Xingning City and some public facilities construction projects. The project is a PPP project operated by the company in 2014 in cooperation with Xingning Municipal Government and Enping second Construction, which accounts for 92% of the project company, Guangdong Pearl Group Town Operation and Development Co., Ltd. The total investment of the project is 7.54 billion yuan, with a total land area of 13481 mu, with a total transferable land area of 6390.67 mu (4.2604 million square meters). After 2015, the annual land area is not less than 1500 mu, and the total revenue is expected to be 10.986 billion yuan, which will bring a stable source of profits to the company every year. In the first half of 2016, the business income related to primary land development was 43.6982 million yuan, accounting for 38.1% of the company's operating income.

Increase participation in the development of real estate projects

Xingning City is positioned as a deputy central city of Meizhou. According to the urban development plan, Xingning will speed up the construction of urbanization, improve the construction of municipal infrastructure and public service facilities, increase the size of the population, and form a spatial structure of "one city, three districts and four belts". Urban construction and urbanization will promote the development of the urban real estate market and play a positive role in the long-term and healthy rise of the property market. From a series of recent actions of the company, we can see that the company is actively increasing investment in real estate development in Xingning area. Internally, the company will increase its capital to Guangdong Mingzhu Group Land Co., Ltd., a wholly owned subsidiary, by 588 million yuan, and the registered capital of the land company will rise to 600 million yuan. Externally, the company announced that it will invest 560 million yuan and 590 million yuan respectively to participate in the cooperative investment in the real estate development projects of "Classic City" and "Hongguiyuan". The "Classic City" covers an area of about 100mu with a total construction area of about 300000 square meters, while the "Honggui Garden" project has a total land area of 105200 square meters and a total construction area of about 586600 square meters. The two plots are located in the hot areas of Xingning City, and participating in the development of the two land projects will bring new profit growth points for the company.

Adhere to diversified development and broaden the space for growth

Through equity participation, the company is involved in iron ore, red wine, real estate development and other fields, bringing stable investment income for the company every year. In the first half of the year, the company received 59.103 million yuan in dividends from Dading Mining through equity participation, accounting for 48.43% of the net profits belonging to shareholders of listed companies. Under the promotion of industrial policy, the production and marketing situation of domestic new energy vehicles is good. The company also sized up the situation and actively participated in Yunshan Motor's capital and share expansion plan in 2015, maintaining a 15% shareholding. In the first half of the year, Yunshan Automobile contributed 32.1171 million yuan in operating income to the company, accounting for 28.01% of the company's total operating income.

The prospect of getting involved in the field is good, with a "buy" rating for the first time.

The fields that the company is involved in, such as PPP, real estate development, new energy vehicles, iron ore and so on, are all well-developed industries driven by policies, and the income is stable, which will strongly support the sustained and stable growth of the company's performance in the future. We estimate that the EPS from 2016 to 2018 is 0.34,0.36,0.37 yuan, and the corresponding PE is .48,49.14,47.79 times. We gave the company 2.2 times PB in 2017 (with reference to real estate companies under 10 billion market capitalization excluding the average PB of 2.23 times), corresponding to the target price of 23.61 yuan, giving a "buy" rating for the first time.

Risk hint

Adverse changes in policy planning; the risk of violating the relevant agreements may occur during the development of the PPP project.