Main points of investment:
Events. The company released its third quarterly report for 2015. During the reporting period, the company realized operating income of 1.7 billion yuan, down 4.5% from the same period last year; net profit belonging to shareholders of listed companies was 39.46 million yuan, down 39.5% from the same period last year; and realized basic earnings per share of 0.04 yuan.
Revenue and net profit fell 4.5 per cent and 39 per cent respectively in the first three quarters of 2015, affected by a decline in property settlement. Geely Building is located at the intersection of Nanjing Road and Binjiang Road in Tianjin, with a total construction area of 610,000 square meters and currently rentable area of 43,000 square meters. At the end of the third quarter of 2015, the company's contract rental rate was 90 percent, and the average unit rent was 2.5 yuan per square meter. The term of the contract is 3 to 10 years. Other properties of the company are built by the company's development projects, including public buildings, bottom merchants, garages and some investment properties. Among them, the bottom business, public construction and other properties are 46500 square meters, the leased area at the end of the reporting period is 325,000 square meters, and the contract lease amount is 16.0582 million yuan.
In September 2015, the company won four pieces of land in Suzhou, with a total equity of 71400 square meters. In 2015, the company plans to achieve operating income of not less than 4.1 billion yuan, an increase of no less than 30%.
Investment advice. The company expands to Suzhou and maintains its "overweight" rating. The company's real estate business is all concentrated in Tianjin, covering commercial housing, indemnificatory apartment and first-class land development business. Since last year, the company has increased the reserve of indemnificatory apartment project (involving 1.2 million square meters of construction on behalf of indemnificatory apartment). At present, the total construction area of the company's rights and interests is 4.37 million square meters (not considering the Hangu Hexi land consolidation project of 1700 mu), which can meet the development of the company in the next three years. In the context of real estate regulation, the company is cautious so that its debt and cash flow are good, while the advance income per share is higher. We estimate that the company's EPS in 2015 and 2016 is 0.19 yuan and 0.24 yuan respectively, and the corresponding RNAV is 6.66 yuan. As of October 30, the company closed at 4.98 yuan, compared with 26.2 times PE in 2015 and 20.8 times PE in 2016. Give the company RNAV as its target price, corresponding to the target price of 6.66 yuan, to maintain the company's "overweight" rating.
Risk hint: the industry faces two major risks: interest rate hike and policy regulation.