Summary of the report:
In 14 years, Fosun has been introduced to become the second largest shareholder, industrial operation + capital operation two-wheel drive development. The company is the only state-controlled listed company in Zhongshan City. Zhonghui Group, a major shareholder, successfully introduced Fosun Group as one of its shareholders in August 2014, which is an example of the first batch of state-owned enterprise reform in Guangdong Province. The company has formulated a two-wheel drive development strategy of industrial operation and capital operation, and may continue to carry out extension in the future.
Major environmental protection business: water supply and sewage treatment as the main; solid waste treatment, engineering and other auxiliary. The company acquired Tianyi Energy in 15 years to enter the field of solid waste treatment, and Zhongshan Public works in 16 years to enter the engineering field. According to the company plan, the company will develop strategically around the water and environmental protection industry chain, and strive to become a national leading comprehensive environmental service provider with the integration of investment, design, construction and operation. In August, the company won the bid Huangpu Environmental Protection PPP Project, and will continue to make efforts in the direction of PPP in the future.
Port passenger transport + market operation business: contribute to stable performance. The average annual customer volume of China-Hong Kong passenger transport which is 60% owned by the company is about 1.2 million, and the revenue is stable. The wholesale business and retail transactions of the company's market operation plate account for about 70% and 30% of the total volume of Zhongshan City respectively, with an annual transaction volume of more than 3 billion yuan. Both passenger services and market operations have high gross margins (about 55% in the past two years), contributing to the company's stable performance and cash flow.
Capital operation: GF Securities Co., LTD., who is a shareholder, contributes 90% of the profit. The company and its subsidiaries hold a total of 10.33% of GF Securities Co., LTD. (A shares account for 9.01% of the total share capital + H shares account for 1.32% of the total share capital) and are one of its major shareholders; we estimate that Guangfa will bring net investment income of 9.81,11.28 and 1.297 billion yuan respectively from 16 to 18. In addition, Zhongshan Public works with GF Securities Co., LTD. to set up a 2 billion yuan M & A fund (investing in energy conservation, environmental protection, new energy and other industries), with a current investment of about 300 million yuan.
Major shareholders increase their holdings to show confidence; equity incentives are in the examination and approval stage. From January 12, 2016 to December 26, 2016, Zhonghui Group, a major shareholder, accumulated 15343015 shares through the trading system of the Shenzhen Stock Exchange, accounting for 1.04% of the total share capital. The current stock price is lower than the average value of the increase price and has a high margin of safety. In addition, according to the announcement, the company's equity incentive plan has been declared and is currently in the approval stage.
Valuation and financial forecast: it is estimated that the operating income of the company in 16-18 years is 13.74,14.61 and 1.519 billion yuan respectively, the net profit returned to the mother is 10.26,11.87,1.34 billion yuan, and the EPS is 0.70,0.80,0.91 yuan.
Risk hint: the company's extension development is not as expected, and the project development is not as expected.