Major shareholders own 3000 mu of barren hills and slopes around the pagoda mausoleum

Fucheng shares announced on October 25 that major shareholders currently own 3000 mu of barren hills and slopes around the pagoda mausoleum. The pagoda mausoleum was surrounded by some barren mountains and slopes left by mining in Sanhe City in the early years, and the land was seriously damaged. this part of the barren mountain and barren slopes have been used by major shareholders and related enterprises for a long time, and are now in the process of leveling, greening, planting fruit trees and ecological restoration. In this case, the land area of the barren mountain yellow slope is about 3000 mu, but at present this part of the assets are not in the name of the company and the pagoda mausoleum.

According to the regulations of the civil affairs department, more than 50% of the commercial cemeteries have been sold is a necessary condition for submitting an application for expansion. According to the regulations of the civil affairs department of Hebei Province, the expansion of commercial cemeteries needs to submit an application for preparation for the construction of the cemetery. The application materials include information such as the area of the original cemetery area, the number of designed cemeteries and the used cemeteries. Under normal circumstances, the operator of an operating cemetery may submit an application for the expansion of the cemetery to the civil affairs department when the number of tombs sold exceeds the planned number by 50%. The number of planned tombs in the Pagoda Mausoleum is 125000, and as of September 30, 2016, 11331 have been sold. According to theoretical calculation, 113669 of the planned saleable tombs have not been sold, and 9.06% of the tombs have been sold.

Jiangsu Yixing's first remote expansion project landed, and the integration of Fucheng opened the curtain of Fucheng's Fucheng Hehui M & A Fund to acquire a 60% stake in Longli Cemetery in Yixing City, Jiangsu Province at a consideration of 200 million yuan, marking the landing of Fucheng's first remote expansion project. Is of great significance. First of all, it dispels the market's concern about Fucheng's ability to expand beyond the traditional advantages of the Beijing-Tianjin-Hebei region; secondly, the Yangtze River Delta region where Yixing is located is the scope of influence of Fushou Garden, and the successful landing of this project also shows the advantages of Fucheng shares in extension expansion as the only A-share listed company in the funeral industry.

The embryonic form of the integrator of the domestic cemetery service industry has emerged, and Fucheng shares, which maintain the "buy" rating, are expected to use the platform of listed companies to integrate the domestic operating cemetery industry with less than 5% CR5. At present, the asset-liability ratio of 32.48% of Fucheng shares and the 62.33% shareholding ratio of major shareholders and their concerted actors also provide more diversified means and more space for epitaxial acquisitions. The landing of Jiangsu Yixing project also confirms our earlier judgment on the epitaxial expansion ability of Fucheng shares. As the 3000 mu of barren hills and slopes around the pagoda mausoleum are still held by major shareholders rather than listed companies, we temporarily maintain our previous profit forecast that the EPS of Fucheng shares from 2016 to 2018 is expected to be 0.25,0.28,0.32 yuan respectively. Using the method of segment valuation, Fucheng shares are given a six-month target market capitalization range of 14.5 billion to 15.5 billion yuan, corresponding to a target price range of 17.70 to 18.93 yuan, maintaining a "buy" rating.

Risk hints: the regulation of the funeral industry has been strengthened, the direction of marketization has been reversed, and food safety issues.