Event: company announcement on the 10th: Guangdong Education Bookstore Co., Ltd., a wholly-owned subsidiary of the company, uniformly increased its capital and shares of its 62 joint ventures, with a total investment of 13.05 million yuan, all of which came from the education bookstore's own funds. After the completion of the capital increase and share expansion, the Education Bookstore uniformly holds 51% of the above 62 associated enterprises, the target enterprises are included in the scope of the consolidated financial statements of the Education Bookstore, and the associated enterprises are in good condition.

Core ideas:

Increase capital, expand shares and integrate issuance channels to promote the company to become stronger, better and bigger: the subsidiary Education Bookstore, by increasing its capital and shares in 62 joint ventures, uniformly increases the proportion of 35% of the shares held by the Education Bookstore from 45% to 51% to achieve absolute control over the distribution channels, which is conducive to consolidating and upgrading the main business of education distribution and effectively strengthening the control over the associated enterprises. We will further consolidate, strengthen, optimize and expand the foundation of state-owned holding enterprises. Guangdong Education Bookstore is one of the company's core assets, which has the unique advantage of distribution channels radiating the whole province. In recent years, it has steadily developed the teaching material distribution business, increased the development of market products and market development, continuously increased the number of outlets to effectively expand the book market at the county and district level, further improved the chain network management model, and realized the book distribution business to grow from 703 million in 2014 to 903 million in 2016. Accounting for nearly 44% of the company's revenue, the net profit of the Education Bookstore 2016 was 90.28 million (the total profit of Guanghong Holdings in 2016 was about 106 million). As the core profit source of the company, Education Bookstore further integrates its associated enterprises and realizes holding, which will further enhance the performance of the company's main distribution business and make the book distribution brand business stronger, better and bigger.

With the acceleration of the reform of state-owned enterprises in Guangdong Province, the leader of the cold chain of meat food is expected to accelerate the integration. In recent years, the reform of state-owned enterprises in Guangdong Province has achieved remarkable results in such aspects as "classified reform and development, striving to create a number of industry singles champions, and reducing the management chain." Guangdong Province has the advantage of being at the forefront of reform and has high hopes in deepening the reform of state-owned enterprises. As a pioneer in the reform of state-owned enterprises, the group introduced private capital as early as 2015 (Xin Jinan and Languang acquired a 49% stake in Guanghong assets, the controlling shareholder) and carried out shareholder-level mixed reforms. At present, in the process of further promoting the reform of state-owned enterprises, under the background of the requirements of strengthening, optimizing and expanding the state-owned capital, Guanghong Holdings strengthens the integration of channel resources around the book distribution business, which is one of the company's main businesses. Holding joint venture enterprises so as to achieve the integration of educational resources and strengthen, optimize and expand. We believe that as the leader of frozen meat food in Guangzhou and the leading enterprise in the field of provincial frozen food business, the company is expected to upgrade its production capacity by virtue of the demolition and upgrading of the food plate in 2018 on the one hand, and become a leading food cold chain enterprise in Guangdong Province and even in China. On the other hand, it is expected to fully integrate resources and give full play to the leading radiation effect. Under the experience of classified management and creating a number of industry champions, it is expected to further integrate the resources of the industry chain. Therefore, we are optimistic that as an active participant in the reform of state-owned enterprises, the company will actively strengthen and expand the business of educational distribution and frozen food.

In the medium to long term, the activation of land value provides a safety cushion for valuation: the implementation opinions of the Guangzhou Municipal people's Government on raising the level of Urban Renewal to promote Saving and intensive Land use adopted in February this year shows that under the policy guidance of Guangdong Province on raising the level of "three Old" Transformation to promote Saving and intensive Land use Company, the transformation of the three old in Guangzhou and Guangdong Province is expected to be further promoted. At present, three pieces of land have been brought into the process of three old transformation: ① Guangzhou West Village site (97 mu) is located near the old city of Liwan, and the company is expected to receive RMB 32.3-4.04 billion according to the calculation of government storage (the company's accounting value: RMB 98 million; assuming that it is divided according to 50, 000 / ha, 2.5 times volume ratio, 40-50%). ② company Zhongshan Tanzhou land (200mu), has completed three links and one flat, and is in a vacant state, asset activation is expected to speed up; Foshan Nanhai land (1200 mu) is also expected to be revitalized, thickening the company's value safety pad. Under the accelerated environment of the three old transformation policies in Guangdong Province and Guangzhou, the company is expected to revitalize the land involved in the reform, so as to provide the company with a medium-and long-term valuation safety cushion.

Profit forecast and valuation: the company's net profit from 2017 to 2019 is expected to be 1.44,1.57 and 191 million yuan, corresponding to 0.25,0.27,0.33 yuan per share for 2017-2019EPS, and the previous share price valuation is 34.7,31.8,26.2 times PE respectively. We believe that under the background of accelerating the reform of state-owned enterprises in Guangdong Province, the company is expected to fully benefit, book distribution and frozen food business is expected to further strengthen the main business and speed up the integration of resources; under the background of accelerating the transformation of the three old enterprises in Guangdong and Guangzhou, the company's medium-and long-term land revitalization provides reliable safety cushions. Therefore, we believe that the company's main business is growing steadily, and the price has tended to be reasonable since the full pullback, and we are optimistic that the reform of state-owned enterprises will benefit from the reform of state-owned enterprises + the sound valuation of the main industry will be reasonable, and the three old reforms will be accelerated to provide valuation safety cushions and maintain strongly recommended ratings.

Risk tips: the relocation of frozen food business is not up to expectations, the book distribution business is declining, and the process of land revitalization is not up to expectations.