Investment highlight
Covering Zhejiang Oriental (600120.SH) for the first time to give a recommended rating, the target price is 40.70 yuan, which has 29.5% room to rise from the current stock price, for the following reasons:
The embryonic form of financial control platform in Zhejiang Province: Zhejiang is the most dynamic region of China's private economy. However, due to historical reasons, there is not a financial control company matching its economic status in Zhejiang Province. We believe that this reorganization of Zhejiang Oriental, replacing the three powerful licenses of insurance, trust and futures is the prelude to the gold reform of Zhejiang Province. We do not rule out the possibility that Zhejiang Province will inject more financial assets and turn Zhejiang Dongfang into Zhejiang Financial Holdings.
The company is facing the inflection point of governance: (1) the International Trade Group replans the group strategy and puts forward the "1x" strategy of business, finance and industrial mergers and acquisitions. Through fixed growth, the introduction of new strategic partners to improve corporate governance. The new leading group of listed companies has rich experience in the financial industry, abundant industrial resources, and is expected to revive the company's financial business in the prime of life. (2) focus on the main business, split assets, and transform the focus from traditional main industries such as real estate and textiles to financial control platforms and cross-border e-commerce.
The accumulation of primitive shares lays the foundation for performance, and quantum communication provides imagination: (1) the company's original shares such as ITC Oriental Capital, Haikang Weiwei and Yong'an Futures earn huge profits, which provides the company with a solid family background. (2) the company's subsidiaries are deeply involved in the quantum communications industry, taking shares in the industry leader, HKUST National Shield and Shenzhou Quantum, and are expected to share the dividends of industrial development.
The biggest difference between us and the market: we believe that the market overestimates the adverse impact of this AMC injection on the company, and underestimates the development potential of the three major business sectors: financial business integration, cross-border e-commerce transformation, and quantum communications investment. In the financial control report, we combed out the two important stock price catalysts of the A-share market: (1) replacement of financial assets; (2) management reform. The former determines the bottom line of valuation, while the latter determines the room for rise. The company's restructured share price partly reflects the first catalyst, but the market does not realize that the company's second catalyst is on its way. We believe that the gradual landing of the three businesses of finance, cross-border e-commerce and quantum communications will bring a second leap in the company's stock price.
Potential catalyst: the company's restructuring plan will be too late, focus on the main business and gradually divest non-core assets, and inject financial assets to improve ROE.
Financial forecast
Based on the principle of prudence, without considering the situation of asset restructuring, we predict that the company will achieve net profit of 689 million yuan and 735 million yuan in 16 and 17 years, corresponding to year-on-year growth rates of 11.9% and 6.7% respectively.
Valuation and suggestion
By using the segment valuation method, the target market value of 17e is 27.4 billion yuan, corresponding to 17e 2.89x P amp B. For the first time, it covers and gives a recommended rating, with a target price of 40.7 yuan, which is 29.6% higher than the current market price.
Risk.
The progress of major asset restructuring is not as expected and the policy is uncertain.
