Main points of investment

Event: Mianshi Investment released three quarterly reports, the company's revenue from January to September 2016 was 6.1158 million yuan, down 86.11% from the same period last year; the net profit belonging to shareholders of listed companies was 125 million yuan, up 10112.74% from the same period last year; and basic earnings per share was 0.425 yuan.

Comments:

Results in the first three quarters increased sharply compared with the same period last year, with less carry-over leading to a decline in revenue. According to the three-quarter report of Mianshi Investment, the company's revenue from January to September 2016 was 6.1158 million yuan, down 86.11 percent from the same period last year; the net profit belonging to shareholders of listed companies was 125 million yuan, an increase of 10112.74 percent over the same period last year; and basic earnings per share was 0.425 yuan. The sharp decline in revenue is mainly due to the fact that the fourth phase of the company's project "Mianshi Xidiwan" is still under construction and does not meet the conditions for carrying forward profits. We expect that with the gradual settlement of the project, the company's revenue level will pick up. The company's performance in the first three quarters increased significantly compared with the same period last year, laying a good foundation for the annual performance. In the first half of the year, Lhasa Shenghao Investment Co., Ltd., an associated enterprise of the company, transferred its equity of Guangzhou Huangpu Chemical Co., Ltd. to realize the income, and the company calculated its share according to the proportion of its shareholding, which led to a substantial increase in the company's profits.

The high-quality target under the background of asset shortage is currently planning a major asset restructuring. The company has been suspended from trading since the opening of the market on September 26, 2016, and the company has confirmed that this major event constitutes a major asset restructuring. The company announced that the transaction mode of this restructuring is mainly for the company to issue shares to purchase part of the assets held by the third party, the underlying assets related to the real estate industry; at the same time, the company buys some of the original assets. At present, the company has a market capitalization of just over 4 billion, plenty of cash, no interest-bearing liabilities and less than 20 per cent shares of major shareholders, which is a high-quality target in the context of the asset shortage.

Investment advice: the company is a typical "small and beautiful" company with no interest-bearing liabilities on its books, plenty of cash on hand and a high margin of safety. At present, the equity incentive of the company has been awarded and completed, and the incentive intensity is fully in place. We believe that the company has broad prospects for future development. It is estimated that the EPS from 2016 to 2018 will be 0.79,0.29,0.35 yuan respectively, and the corresponding PE will be 18.1,49.3 and 40.9 times respectively.

Risk tip: monetary policy tightens.