Intent to sell the assets and related business of Yanjiao Dairy Breeding Branch Fucheng Co., Ltd. issued an announcement on September 5 to sell the assets and related business of Yanjiao Dairy Breeding Branch. The assets and related business unit to be sold this time are Yanjiao Dairy Breeding Branch, a subsidiary of the company. It is located in the north of Xiwu Gezhuang Village, Yanjiao Economic and Technological Development Zone, Sanhe City, Hebei Province. Construction began in 2004. It can store 6,000 cows, and initially introduced New Zealand Holstein cows as a cow source. Currently, it has 3,493 heads and produces more than 12,000 tons of fresh milk per year. Currently, it is Yili's key raw milk supplier. Prices of raw milk remain low, environmental costs continue to rise, and profit margins for the dairy products business have been severely curtailed. Under the influence of Beijing-Tianjin-Hebei integration and the relocation of Beijing's administrative sub-center to Tongzhou District, the population density of Yanjiao has begun to increase. The difficulty of preventing and isolating the epidemic in the Yanjiao dairy farming business within the Yanjiao district has increased, and the risk has increased. At the same time, the number of lactating cows began to decline in April, leading to a decline in milk production. Combined with the slump in raw milk prices, the profit margins of dairy farming have been severely curtailed. The advantages of Fucheng Co., Ltd. are concentrated in the beef cattle sector. Selling dairy cows is conducive to optimizing the company's resource allocation and is in line with the company's long-term development plan and shareholders' interests. The net profit of dairy farming in 2015 was 2.62 million yuan, accounting for only 1.6% of the net profit of Fucheng Co., Ltd. The dairy breeding branch achieved operating income of 73.3991 million yuan and net profit of 2,616,900 yuan in 2015. The net profit of the dairy farming business contributed only 1.6% to the net profit of Fucheng Co., Ltd. in 2015. At the same time, in January-July 2016, the dairy farming branch lost 14.03 million yuan due to rising upstream environmental protection costs and low downstream raw milk prices. Therefore, the sale of the dairy farming business had a slight positive impact on the net profit of Fucheng Co., Ltd. in 2016. Graveyard service industry integrators, taking advantage of the rapid rise in volume and price in the industry, cemetery services are the largest segment in the funeral industry. The market capacity in 2015 was about 41 billion yuan, accounting for 58% of the market size of the entire industry. Due to obvious regional reasons, the current market concentration is still very low. The market share of the top 5 domestic service providers is only 5%. Currently, the number of domestic operating cemeteries exceeds 1,900. Fucheng Co., Ltd. is expected to carry out industry integration through listed company platforms in the future. The future growth of Fucheng shares comes, on the one hand, from the average annual price increase of 15% to 20% for stock graves, and on the other hand, the increase in the number of graves brought about by external expansion. Deterministic growth through the economic cycle According to our profit forecast, the revenue scale of Fucheng Co., Ltd. in 2016-2018 will reach 1,438 billion yuan, 1,641 million yuan and 1,793 billion yuan, respectively, up 7.0%, 14.1%, and 9.3% year on year; net profit attributable to the parent company in 2016-2018 will reach 189 million yuan, 226 million yuan and 263 million yuan respectively, up 13.5%, 19.9% and 16.4% year on year, respectively. EPS for 2016-2018 was 0.23 yuan, 0.28 yuan, and 0.32 yuan, respectively. Using a segmented valuation method, Fucheng Co., Ltd. was given a six-month target market value range of 12 to 13 billion yuan, corresponding to the target price range of 14.66 to 15.88 yuan, maintaining a “buy” rating. Risk warning: regulation of the funeral industry has been strengthened, and there has been a reversal in the direction of marketization; food safety issues.