Company Profile Guanghong Holdings is a large provincial state-owned listed company, a top 500 enterprise in Guangdong Province, and the only listed company platform under Guanghong Assets, the majority shareholder. The main business areas include distribution of educational publications, frozen food supply, etc. In the first three quarters of 2016, revenue of 1,484 billion yuan was achieved, and net profit attributable to the parent company was 79 million yuan. State-owned mixed reform completed. Land price revaluation In December 2015, Guanghong Asset Management Co., Ltd., the controlling shareholder of the company, announced the completion of the mixed state-owned asset reform. Two Shenzhen equity investment companies obtained 49% of Guanghong Asset's shares for 2,946 billion yuan. Currently, the company has rich land reserves, and the new shareholders have a strong real estate background. In the future, it can provide great help to the company in land monetization. We estimate that if the nature of the land were to be completely changed from industrial land to commercial land, the company's current land reserve value would exceed 13 billion yuan. According to the 6:4 division of interests with the government, the value belonging to the company will reach 8 billion yuan. The two main businesses have obvious competitive advantages, and the development prospects are bright, and the company's book distribution business revenue is growing steadily. In the future, in line with the development trend of the book distribution industry, a relatively small amount of assets can be reasonably invested to further optimize book sales and distribution services, occupy regional rural markets, and create brand characteristics. At the same time, the integration of online and offline education will bring new profit growth points to the company's main education business. On the other hand, the company has a clear competitive advantage in the sale and distribution of frozen products and cold storage operations, accounting for 70% of the frozen meat market in the province; the company plans to gradually shift from cold storage operations to developing cold chain logistics centers, and is expected to become a new leader in the cold chain logistics field in the future. The increase in executive holdings shows confidence in development. The new chairman is young and promising. He previously served as Assistant General Manager and Deputy Secretary of the Commission for Discipline Inspection at Guangdong Commerce and Trade Group, and is one of the core backbone at the group level. The chairman of the board took office in December 2015. Within less than one year of taking office, he successively completed the company's mixed reform and various rectification tasks, and joined other executives to increase the company's stock holdings in July 2016. The increase in holdings was 57 million yuan, with an average increase of 9.06 yuan/share. This increase helps stabilize the company's stock price and shows the management's confidence in the company's subsequent development. Profit forecast and valuation We predict that the company's EPS for 2016 to 2018 will be 0.19 yuan, 0.24 yuan, and 0.28 yuan, respectively, with a target price of 13 yuan, maintaining an “gain” rating. Risk warning: The development momentum brought about by the mixed reform of state-owned assets falls short of expectations; the value of idle land reserves is difficult to monetize.