Main points of investment:
The layout of the company's real estate business is reasonable, and its profitability has increased steadily. Against the background of a substantial year-on-year increase in sales of commercial housing market across the country in 2016, the company firmly implemented the layout strategy of the core cities along the Yangtze River economic belt and adjusted the proportion of the urban structure of the project. in the first three quarters of 2016, a new land reserve with a volume area of about 859800 square meters was added to Wuhan, Suzhou, Hangzhou, Shanghai and Chongqing. As the income from the above-mentioned high gross margin projects is gradually recognized, the company's real estate performance is expected to grow steadily.
The typical representative of "conversion from civilian to military", military special vehicle is the starting point of the company's military industrial layout. At present, the company's military business is mainly military special vehicles, and its platform for carrying out military special vehicle business is the holding subsidiary Southern Dumas, which was established in 2006. the company has a 70% stake through its wholly-owned subsidiary Chongqing Dumas Industrial Co., Ltd., and Changan Automobile, a subsidiary of China Arms equipment Group, holds 30%. Southern Dumas has a profound accumulation in the business of military special vehicles, and currently has the list of weapons and equipment manufacturing units and the second-class confidentiality qualification of weapons and equipment scientific research and production units. With the decline of the civil special vehicle market, the military special vehicle is expected to become the focus of the company's special vehicle business; the company is a typical representative of "civilian to military".
Strategic cooperation Poly defense, military vehicle exports are expected to increase significantly. In September 2016, the company signed a strategic cooperation agreement with Poly Defense, contributing 200 million yuan to become one of the sponsors of the Poly Defense Fund, and Poly Defense Investment also promised to participate in the company's fixed growth plan. Poly is a large defense company with comprehensive import and export rights of weapons and equipment. In 2014, the import and export of military and civilian products reached US $5.5 billion, of which US $2.44 billion was signed for military exports, ranking among the top three domestic military trade enterprises for nine consecutive years. At present, the company's military business is mainly military special vehicles, through cooperation with domestic military import and export leaders, product exports are expected to grow, the original business advantages may be strengthened.
The primary and secondary markets have been linked, and the company's military industrial layout has been continuously improved. For Poly, through cooperation with the company, it will form a linkage between the primary and secondary markets and promote stable performance growth. For the company, on the one hand, the linkage of the primary and secondary markets is conducive to seeking relevant opportunities for the construction of overseas defense bases, on the other hand, Poly defense investment will provide the company with high-quality military industrial target assets at home and abroad, thus helping the company to expand the business scope of military products, and will further improve the business layout of the company's military industrial field.
There is still room for epitaxial mergers and acquisitions to strengthen the superiority of military industry. On February 20, 2017, the company issued the "A-share non-public offering Plan", which intends to raise no more than 1.07 billion yuan from Weihai Poly and Poly for investment in new military special vehicle equipment projects and exoskeleton robot projects. Weihai Poly and Poly I are funded by Poly Defense, the latter fully demonstrates its determination to cooperate with the company through full subscription, and we are optimistic about the company's future development in the field of military industry. In addition, the company has initially formed the product layout of military special vehicles + exoskeleton robots in the military field, and according to the cooperation agreements with Poly Defense Investment, University of Electronic Science and Technology, Beijing Institute of Technology, business development will be carried out in more areas such as overseas defense base construction, special UAV, vehicle information command platform, large expansion than intelligent expansion square warehouse, and so on. We believe that the extension of the company's military industry is expected to accelerate, and there are still great expectations of mergers and acquisitions in the future.
Equity incentive binds benefits, demonstrating the company's confidence in development. The company's first restricted stock incentive plan was awarded on November 1, 2016, granting a total of 80 million restricted shares at a price of 3.32 yuan per share, accounting for 3.20% of the total share capital of listed companies.
We believe that the large scale of equity incentive will help to stimulate the enthusiasm of the management team, improve operational efficiency, and be optimistic about the long-term development of the company's performance.
Maintain the company's "buy" rating: the company determines the "real estate + military industry" two-wheel drive development model, employee shareholding is bound to internal interests, the military layout is expected, and the performance is expected to achieve rapid growth.
Based on the principle of prudence, without considering the fixed growth factors, the company's net profit from 2016 to 2018 is expected to be 803 million yuan, 1.048 billion yuan and 1.378 billion yuan respectively, and the corresponding EPS is 0.33 yuan per share, 0.43 yuan per share and 0.57 yuan per share respectively. According to the stock price of 6.96 yuan on February 20, 2017, the corresponding PE is 21, 16 and 12 times respectively. The company is the first listed company to announce a three-year fixed increase plan after the promulgation of the new refinancing regulations of the Securities and Futures Commission on February 17, which is of typical significance. The pricing base day of this non-public offering is the price on the first day of the issue period, which is eye-catching, but we should see that its essence is to introduce Poly Defense as a strategic investor, as well as the expected injection of military export channels and assets that may be brought about. This will add vitality to the company's development blueprint. Be optimistic about the company's long-term strategic development and maintain the company's "buy" rating.
Risk tips: a sharp decline in the profit level of the real estate business; the development of the military special vehicle business is not as expected; the risk of failure of administrative examination and approval; and the uncertainty risk of the company's future promotion of the project.