Investment highlights: The company issued an announcement to acquire 23.2% of the total shares of Mr. Zheng Songxing and Accurate Gain at HK$2.05 per share, corresponding to RMB 1.83 billion per share, for a total purchase price of HK$3.81 billion, corresponding to RMB 3.4 billion. After this acquisition, the company will become the largest shareholder in South China City, and this transaction constitutes a major asset restructuring. Ping An's view: Use acquisitions to extend the industrial chain. South China City has adopted an “integrated two-wing” business model, that is, a “two-wing” business based on the establishment of large-scale integrated trade, logistics and commodity trading centers, with complete supporting commercial facilities and residential properties in close proximity to the main body. It has formed a relatively mature business model. Currently, it has layouts in mainstream cities such as Shenzhen and Chongqing. Nakasu's current business mainly focuses on real estate and residential development. With this acquisition, the business will be further expanded into the industrial real estate field. In the future, Zhongzhou Holdings can take advantage of the resource advantages that South China City has created locally through trade and logistics, give full play to its experience and advantages in residential real estate, commercial real estate development, and hotel operations, have a synergistic development effect with South China City, and promote the implementation of Zhongzhou's future industrial chain expansion and development strategy. The equity method treatment shows a high rate of return. The purchase price was HK$2.05 per share, a 25.77% premium over the latest closing price, but the corresponding PB was only 0.64 times. Since the company is not the actual controller after the acquisition is completed, the accounting treatment will be carried out according to the equity ratio, and the net profit of South China City will be shared according to the share ratio between the two places. Referring to the net profit of HK$3.5 billion in 2015, the company's corresponding investment income reached HK$810 million. More importantly, with reference to South China City's ROE of 13.9% in 2015, according to the purchase price of 0.64 times PB, the return on investment under the equity law is equivalent to 21.7%, far higher than Zhongzhou's 2015 ROE (11.6%), and higher than Vanke (19.1%), etc. High execution continues to be proven. According to China Index data, the company achieved sales of 10.54 billion yuan in 2016, an increase of 42.8% over the previous year, achieved the miracle of nearly fivefold sales in three years, and exceeded the target of 50% compound growth over three years, making it a rare real estate enterprise with continuous high growth characteristics in the market. Since Nakasu took over, the company's high executive power and management's unique vision have been continuously proven. Before policy tightening and industry sentiment declined, the company once again took major steps to acquire shares in South China City to continue the industrial chain and enrich the regional layout and business format, enhance resilience to risks, and once again proved its keen market observation and unique vision. Maintaining the “Highly Recommended” rating: The company's EPS in 2016-2017 is expected to be 0.64 yuan and 0.78 yuan, respectively, and the current stock price corresponding to PE is 31.8 times and 25.8 times, respectively. After the completion of this acquisition, it will further extend the company's industrial chain layout and enrich the company's business format. At the same time, the company's equity incentives and employee shareholding bind employees' interests, sales growth rate and scale will increase rapidly, and the execution ability of private enterprises to enter the market will be greatly improved. As a rare real estate company with the characteristics of continuous high growth in the current market, the majority shareholders and listed companies in Shenzhen are rich in land resources and maintain a “highly recommended” rating. Risk warning: Risk of performance falling short of expectations.