Incident: The company announced that it intends to acquire 23.20% of the shares of Mr. Zheng Songxing and Accurate Gain in Huanan City Holdings through its wholly-owned subsidiary Best Wisdom Cash. Cash acquired 23.20% of South China City's shares and became the largest shareholder. The company announced that it intends to acquire 23.20% of the shares held by Mr. Zheng Songxing and Accurate Gain in cash through Best Wisdom, a wholly-owned subsidiary which is indirectly held. The purchase price is HK$2.05 per share, equivalent to RMB 1.83 billion per share, for a total price of approximately HK$3.8 billion. After this acquisition, the company became the largest shareholder in South China City, but did not control it. South China City - a large-scale integrated trade and logistics leader. South China City focuses on establishing large-scale integrated trade, logistics and commodity trading centers, with complete supporting commercial facilities and residential properties close to the main body. Its business is spread all over China, including Shenzhen, Nanning, Nanchang, Xi'an, Harbin, Zhengzhou, Hefei, Chongqing, etc. In terms of land reserves, there are about 8.07 million square meters of completed and unsold area left in South China City. There are still 7.42 million square meters of properties under development. The purchased land can be built up to 15.63 million square meters, and the total planned construction area is as high as 81.82 million square meters. Complementary strengths to cope with the second half of real estate. After the transaction is completed, the two sides can promote industrial agglomeration and industry-city integration in corresponding key cities/regions, give full play to their respective advantages in land resources, financial resources, brand resources and human resources, and form complementary resources and enhance competitive strength. The company completed the extension and expansion of the industrial chain by holding shares in South China City. At the same time, it has enriched the company's regional layout, business format and business model, and enhanced the resilience of the company's operations to risks. Investment advice. Listed companies insist on positioning themselves as “comprehensive real estate developers with regional competitiveness”, focusing on regions, deep-cultivating cities, and multi-market linkages. If the acquisition of South China City succeeds, it will add impetus to the extension of the company's industrial chain, and at the same time, the two sides will form business collaboration, which is mutually beneficial. We expect the company's 2016 and 2017 EPS to be 0.82 and 1.09 yuan. The company's suspension price on October 26, 2016 was 20.24 yuan, corresponding to 24.68 and 18.57 times PE in 2016 and 2017. Since the transaction has not yet been completed, the performance forecast for South China City has not been announced. Without considering the impact of the acquisition of Huanan City on the company's income statement, the company's RNAV was 28.89 yuan, giving RNAV a 9 discount as the target price, or 26.00 yuan, giving it a “buy” rating. Risk warning: transaction approval risk, exchange risk. The real estate industry faces two major risks: declining fundamentals and interest rate hikes.