Main points of investment:

With the launch of the reform of the state-owned enterprises, the company will become a state-owned holding company with a sound incentive mechanism: on June 12, 2015, the company announced that the company had received a notice from the Pudong State-owned assets Supervision and Administration Commission forwarded by the controlling shareholder Shanghai Waigaoqiao (Group) Co., Ltd. the main contents of the notice are as follows: first, according to the overall deployment of the reform plan of state-owned enterprises in Pudong New area. It is planned to build a listed company into a state-owned investment holding public company with clear strategic objectives, standardized governance structure, perfect incentive and restraint mechanism and outstanding competitive advantages. Second, adjust the management system of Waigaoqiao Group and listed companies, enrich the senior management team of listed companies, optimize the organizational structure of listed companies, improve the market-oriented management mechanism, sort out the unlisted assets of Waigaoqiao Group, entrust listed companies to manage and sign entrustment agreements. The above-mentioned relevant matters have yet to be implemented after the Waigaoqiao Group and listed companies have fulfilled the relevant program decision-making procedures.

With the start of the reform of the company's state-owned enterprises, it will become a state-owned holding company with a sound incentive mechanism: we believe that the notice essentially affirms the market competitive industry status of Waigaoqiao listed companies. The company will achieve the first breakthrough in the incentive and restraint mechanism of Shanghai state-owned enterprises, and is expected to introduce relevant policies smoothly in the later stage. In the future, listed companies will enhance their value through management and choose the opportunity to withdraw to achieve the appreciation of state-owned capital, that is, the equity of listed companies is expected to be gradually transferred to the state-owned mobile platform in order to maintain and increase their value. The plan has been refined to the management system and personnel team, we expect that in the later stage, Gaoqiao Group will achieve the sinking of the management center, complete the expansion of listed companies, and do the development strategy of virtual enterprise groups. In addition, it is a late business trend to solve the problem of inter-industry competition between groups and listed companies at multiple levels, avoid business conflicts, and strengthen and enlarge listed companies. We believe that the plan has laid the foundation for a greater institutional breakthrough of listed companies in the later stage, and continue to be optimistic about the future development of the company.

Investment suggestion: Waigaoqiao and even Waigaoqiao Co., Ltd. will become an important global strategic core platform company under Prime Minister Li Keqiang's "opening up and reform". At present, the construction of the free trade zone has become a national strategy, and the fundamentals of the company's Waigaoqiao will enter a substantial reversal stage. In the future, the company will focus on developing the first phase of the free trade zone, including the port area, logistics area, Senlan Middle Block and Southern Block International Community, in order to achieve "production-city integration". Among them, the Senlan project 1.3 million square meters (currently launched 78.58 million square meters), is expected to bring rich returns to the company. We estimate that the EPS of the company in 2015 and 2016 is 0.74 yuan and 0.91 yuan respectively. Compared with the revaluation of production factors under the Hong Kong free port policy, we expect that the company's asset value will significantly benefit from the promotion of the free trade pilot zone in the future, and will receive five major benefits: policy dividend, industrial upgrading, land price revaluation, positioning change and function upgrading. For this reason, we expect the company's RNAV to reach 42.72 yuan. As of June 15, the company closed at 44.66 yuan, corresponding to 60.35 times PE in 2015 and 49.08 times in 2016. Considering that the company will benefit from the state-owned assets reform and the construction of the free trade pilot zone in Shanghai, targeted financing will speed up the construction of the company's five major platforms, and taking into account that the average PE of listed companies in the Shanghai Free Trade Zone in 2015 is about 77 times, we use the 2015 PE of 85 times, or 59.20 yuan, as the company's six-month target price to maintain the "overweight" rating.

Risk hint: the industry faces two major risks: interest rate hike and policy regulation.