* ST Pearl River implements a major asset exchange, and Beijing Cereal shares plan to enter the capital market: ST Pearl River's main business property management income accounts for more than 80%, but it belongs to a low-profit industry, and labor costs continue to rise rigidly, and the company has been losing money since 2014. The company recently issued a major asset restructuring plan, including major asset exchange, issuing shares to purchase assets and non-public offering shares to raise supporting funds. 1) significant asset replacement: Pearl River Holdings replaces the main assets and some liabilities with the equivalent portion of the 67% equity stake held by Beijing Grain Group. 2) issue shares to purchase assets: the difference of 67% of Beijing Grain shares after asset exchange is purchased by Pearl River Holdings to Beijing Food Group. At the same time, Pearl River Holdings issued shares from the State Control Center, Guokai Finance and Xinniu Runying to buy a total of 33% of Beijing Grain shares; 3) issued shares to raise supporting funds: Zhujiang Holdings raised 570 million yuan in matching funds from the non-public offering of shares of Beijing Food Group. After the completion of major asset restructuring, Beijing Grain shares will become 100% holding subsidiaries of listed companies, and the main business of listed companies will be vegetable oil processing and snack food manufacturing. The shareholding proportion of Beijing Grain Group will be increased from 26.36% to 41.77%.

Beijing Food Co., Ltd.: the existing vegetable oil + snack food business develops in parallel. 1) vegetable oil processing + snack food manufacturing, the growth of the company is driven by two main industries in parallel: in September 2015, Beijing Cereal completed the acquisition of about 51% of the equity of Zhejiang Little Prince. At the same time, it transferred its shares in 14 trading companies to Beijing Food Group in 2016. So far, Beijing Food Co., Ltd. is mainly engaged in the processing, sales and trading of vegetable oil and oil, as well as the manufacture of snack food. In 2015, the company achieved an income of 5.04 billion yuan and a net profit of 158 million yuan belonging to the parent company. 2) vegetable oil processing: outstanding brand advantages, multi-category vegetable oil coordinated development. Beijing Grain Co., Ltd. has focused on the vegetable oil processing industry for many years, forming well-known brands such as "Ancient ship" and "Lubao". At present, it has a virgin production capacity of 1.2 million tons per year, refining capacity of 48,000 tons per year, and filling capacity of 3378 million tons per year. From January to May 2016, the company's oil sector achieved revenue of 1.955 billion yuan, accounting for 47.50% of the total revenue, mainly subsidiaries such as Beijing Grain Tianjin, Eysen Lubao and Ancient ship Oil. 3) snack food manufacturing: the acquisition of Zhejiang Little Prince, the industry's leading snack food brand. In 2015, Beijing Cereal acquired about 51.00% of the shares of Zhejiang Little Prince, creating another main business besides vegetable oil processing. Zhejiang Little Prince achieved an income of 579 million yuan and a net profit of 70.8441 million yuan in 2015.

Plant edible oil + snack food benefits from the upgrading of consumption, Beijing Food Group is strong: 1) healthy products drive the development of edible vegetable oil. Beijing grain stock category reserve is rich: China's edible vegetable oil output reached 67.3424 million tons in 2000, with an average annual compound growth rate of 14.9% from 2015 to 2015, higher than the global average. Among them, soybean oil and rapeseed oil accounted for the highest proportion, with consumption reaching 15.25 million tons and 8.3 million tons respectively; other oils, including corn oil, accounted for no more than 5 per cent. However, with the improvement of residents' living standards, the proportion of high-end small oil represented by corn oil will gradually increase, but soybean oil is still the main consumption variety. With the help of group resources, Jingfeng vegetable oil business has the advantage of resisting the risk of raw material cost fluctuation, location and cost control, brand advantage and management advantage, and has rich reserves of corn oil, sunflower oil and other categories. 2) consumption upgrading drives the snack food industry to maintain a high boom, and the Little Prince's core competitive advantage is outstanding: the domestic snack food market reached 387.5 billion yuan in 2014. continue to maintain a high bearing, 2004-2014 snack food industry scale average annual compound growth rate of 21.78%. In terms of production, the total output of domestic snack food reached 6.458 million tons in 2014, an increase of 15.40% over the same period last year. 2004-14, the average annual compound growth rate of snack food industry was 12.81%. The improvement of consumption power, the rise of consumers and the cultivation of consumption habits can still ensure relatively steady growth in the future. Based on R & D ability, innovate the profit model of "professional manufacturing + cultural creativity + Internet" to create the core competitiveness of the company's snack food brand Little Prince. 3) relying on Beijing Food Group to create an important layout of the group's industrial system of "one chain, two wings and three platforms": on the one hand, Beijing Cereals has a sound industrial system and financial strength. it will provide strong support for the business of vegetable oil processing + snack food manufacturing of listed companies, and the company's grain procurement and trading system can ensure a stable source of raw materials for vegetable oil processing. Effectively weaken the impact of raw material price fluctuations on the company's cost side And the complete product sales system will provide channel support for the little prince's snack food to open up the northern market. On the other hand, as an important layout and capital operation platform of the modern industrial system of "one chain, two wings and three platforms" of Beijing Food Group, the company is expected to fully integrate the group's high-quality resources. on November 16, the company announced that Beijing Food Group intends to support a loan of 1 billion yuan for soil remediation and organic green pollution-free agricultural products with an annual net profit of not less than 100 million yuan.

Profit forecast and investment advice: 16-year target price of 15 yuan, covering the first time to give a "buy" rating. After the completion of major asset restructuring, Beijing Grain shares will officially land in the capital market. Do not consider the soil remediation and organic green pollution-free agricultural products planting and marketing projects announced by the company for the time being. We estimate that in 2016-18, the company will achieve an income of 58.21 scarp 6290cm 6.805 billion, and the net profit attributable to the parent company will be RMB 1.44 million, corresponding to an EPS of RMB 0.21 and 0.23 respectively (considering additional issuance and thickening of equity). We use the method of segment valuation to value the vegetable oil business. It is estimated that in 2016-18, the vegetable oil business will achieve an income of 51.781,55.92 billion yuan, contribute a gross profit of 3.62 billion yuan, and give it to 1xPS, with a target market value of 5.5 billion yuan. For the snack food business, we expect the snack food sector to achieve an income of 542 million yuan in 2016-18 and contribute a gross profit of 1.97 million yuan to 2.16 billion yuan. In 17 years, it contributes about 120 million of the net profit, 51% of the company's equity corresponds to 60 million profit, to 30xPE, the target market value is about 2 billion yuan. At the same time, as the listing platform of Beijing Food Group, it is expected to fully integrate the high-quality resources within the Group in the future, and the increase of its stake in Beijing Food Group demonstrates its confidence in future development. the Group intends to support a loan of 1 billion yuan for soil remediation and organic green pollution-free agricultural products with an annual profit of not less than 100 million yuan, with a market capitalization target of 3 billion. Comprehensively consider giving * ST Pearl River a target market capitalization of 10.5 billion in 2016 and 15 yuan in equity after the IPO, giving a "buy" rating for the first time.

Risk hints: the risk of suspension, suspension or cancellation of restructuring and approval, operational risk of placed assets, failure to achieve promised performance of placed assets and risk of insufficient profit compensation