Key points of investment:
The majority shareholders plan to increase their holdings by no less than 50 million yuan, fully demonstrating their confidence in development. On May 9, 2017, the company issued the “Notice Concerning Shareholders' Stock Increase and Plans to Increase Shareholdings”, which revealed that the controlling shareholder Bank of East Bank Holdings increased the company's shares by 1.74 million shares in the secondary market, accounting for 0.07% of the company's total share capital. The average transaction price was 5.82 yuan/share, and the total transaction price was 10.12 million yuan. At the same time, it disclosed Bank of East Bank Holdings' plans to increase its holdings within 6 months from May 9. May 9 is the lifting of the ban on restricted shares held by Bank of East Bank Holdings. Previously, it had promised not to reduce its holdings of restricted shares listed and tradable shares within the next 6 months. This increase in holdings fully demonstrates the confidence of the controlling shareholders in the company's future development.
The “People's Liberation Army” joined hands with Poly, and the company's fundamentals continued to improve. The company's real estate business achieved revenue of 13.3 billion yuan in 2016, an increase of 98.15% over the previous year. In the future, as revenue from high gross margin projects in Wuhan, Suzhou, Hangzhou and other places is confirmed, performance is expected to grow steadily. At the same time, the company signed a strategic cooperation agreement with Poly Defense to deepen its military sector layout: on the one hand, Poly Defense Investment will provide the company with high-quality military target assets at home and abroad, thereby helping the company expand the scope of military products; on the other hand, as a large-scale defense company with comprehensive import and export rights for weapons and equipment in China, the company's military vehicle exports are expected to grow and its original business advantages will be strengthened.
Maintaining the company's “buy” rating: Based on the principle of prudence, without considering the impact of the fixed increase on the company's performance for the time being, the company's net profit in 2017-2019 is estimated to be 1,115 million yuan, 1407 million yuan, and 1,737 million yuan respectively. The corresponding EPS is 0.46 yuan/share, 0.58 yuan/share, and 0.72 yuan/share, based on the closing price of 5.83 yuan on May 9. The corresponding PE is 13, 10 and 8 times, respectively. Currently, the company's valuation is in a hollow, the stock price has a good margin of safety, and the company's “buy” rating continues to be maintained.
Risk warning: The profit level of the real estate business has declined sharply; the development of the military special vehicle business falls short of expectations; fixed increase the risk of failure to pass administrative approval; and the uncertain risk of future progress of the company's fixed increase project.
