Main points of investment
Hongyuan Group, a major shareholder, is strong. Yuehongyuan is a listed company in Dongguan City, which is mainly engaged in real estate development, as well as raw coal mining and sales, factory leasing in industrial areas and hydropower construction. Guangdong Hongyuan Group Co., Ltd., the major shareholder of the company, holds 16.52% of the shares of the company. Mr. Chen Lin, founder and current chairman of Hongyuan Group, actually controls the listed company by holding 69% of Hongyuan Group shares. Hongyuan Group was founded in December 1987. after more than 20 years of development, Hongyuan Group has gradually developed into a diversified and cross-regional large group enterprise based on industrial zone operation and real estate development. import and export trade, service industry, pharmaceutical industry, sports industry and other simultaneous development of diversified, cross-regional operation of large-scale group enterprises, of which Yuehongyuan An is the only listed platform of the group's main real estate.
Sales are good for the whole year and are expected to turn losses into profits in the first half of the year. At present, the company has a total of 7 real estate projects, accounting for a total of 508 million square meters, with a total construction area of 109.8 million square meters, concentrated in Dongguan and Kunshan. By the end of 2015, the unsettled reserve area is about 800,000 square meters. The company has been relatively cautious in taking land in recent years, and the current reserve area can meet the development and sales in the next 2-3 years. At present, the holiday sales of Cannes, a wholly-owned project, are good. Other proposed or under construction projects include Diting Mountain, Kunshan Huaqiao Project and time International. In the first quarter of 2016, due to the improvement in sales, the company achieved an operating income of 370 million yuan, an increase of 175.24% over the same period last year, and a net profit of 7.566 million yuan, an increase of 152.32% over the same period last year. The company expects to turn a loss into a profit in the first half of this year compared with the same period last year.
The volume of coal mine and hydropower business is small, and the income is declining due to the influence of the industry. The company entered the resources and mineral industry in 2009 and now owns Guizhou Hetaoping Coal Mine and Coal Gou Coal Mine. due to the poor prosperity of the coal industry, the company's coal mine business has been in a state of loss in recent years. The overall income of the company's coal mine business in 2014 and 2015 was 39 million yuan and 26 million yuan respectively, and the gross profit was-2.14 million yuan and-6.24 million yuan respectively. The contribution of the company's hydropower business to revenue is relatively small, only about 6%, and has been in a state of decline in the past two years. The company's hydropower business operating income in 2014 and 2015 was 19 million yuan and 18 million yuan respectively, and the gross profit was 6.46 million yuan and 2.85 million yuan respectively.
The company has a strong driving force for transformation. Due to the small volume of the company's real estate, coal mine business and hydropower business, and is greatly affected by industry fluctuations. On the one hand, the company maintains the sound foundation of the main business of real estate, follows the policy of coal mine merger and reorganization to promote the integration of coal mining industry, at the same time, it also confirms that "actively explore industry investment opportunities in line with the actual development of the company." seek ways to promote the company's transformation and upgrading, and open up new business growth points. "
Investment advice: the company is Yuehongyuan, a real estate company in Dongguan controlled by Hongyuan Group, with a land reserve of about 800,000 square meters, and annual sales are expected to improve. At the same time, the company's coal mine, hydropower business is facing downward pressure. The company has made it clear that it will "actively explore investment opportunities in the industry in line with the actual development of the company, seek ways to promote the transformation and upgrading of the company, and open up new business growth points". We believe that with the strong strength of the major shareholder Hongyuan Group, the company is expected to usher in the opportunity of transformation and upgrading. It is estimated that the EPS of the company from 2016 to 2017 is 0.050.07 yuan, and the corresponding PE is 180.2 and 128.7 times respectively. For the first time, it is given an "overweight rating".
Risk tips: sales in the real estate industry are lower than expected; monetary policy is tightened; local sales are declining.