Main points of investment
Event: the company released a semi-annual report that 2017H1 realized operating income of 760 million yuan, down 44.8% from the same period last year, and realized a net profit of 11 million yuan belonging to the mother, an increase of 130% over the same period last year. Of this total, Q2 achieved an operating income of 370 million yuan in a single quarter, down 64.7 percent from the same period last year, and the net profit returned to its mother was 5.922 million yuan, up 483.2 percent from the same period last year. At the same time, the company expects to achieve a net profit of 1169.9 million yuan and 15.953 million yuan in the first three quarters, an increase of 10% to 15% over the same period last year.
The performance is basically in line with expectations, waiting for the release of the fourth quarter results. During the reporting period, the company's revenue decreased significantly compared with the same period last year, mainly due to a decrease in carryable items compared with the same period last year. However, during the period, Xiangyang City Plaza, the main settlement project, held 100% equity for the company, resulting in a substantial increase in net profit compared with the same period last year. 2017H1 real estate sales contract area of 124000 square meters (+ 17%), settlement area of 64000 square meters, of which Xiangyang City Plaza settlement area of 51000 square meters, contributed most of the performance. During the reporting period, the company received 3.86 billion yuan in advance accounts, an increase of 380.7% over the same period last year and 116.8% month-on-month growth. The substantial increase in accounts received in advance provided support for the company's performance. At the same time, the company still has 60,000 signed areas that have not yet been settled, and the fourth quarter is the peak season for company settlement (usually contributing more than 70% of the performance), so the release of fourth-quarter results is a high probability event.
The real estate listing platform controlled by central enterprises is expected to benefit from the integration of real estate resources of the Power Construction Group. After Dianjian Real Estate Holdings in 2014, the company was transformed from a local regional real estate company in Wuhan into a listed commercial real estate controlled by a central enterprise. The company takes Wuhan as the core area, focusing on Chengdu, Nanjing and other cities. On August 23, the company won a piece of land in Dashiba in Jiangbei District of Chongqing for 1.195 billion yuan, officially marching into Chongqing, and steadily advancing the layout of the whole country. At the same time, as the only real estate listing platform under the Power Construction Group, the company is expected to benefit from the integration of land resources within the group.
To expand cultural and creative industries, the development of small towns with characteristics is worth looking forward to. In 2016, the company invested in Chinese and Indian culture to expand cultural and creative industries. Recently, it has invested 18 million (90% equity) to jointly develop Xiaoguishan Industrial Park with Hubei Electric Power Construction No.1 Engineering Company. The company plans to build the project into a cultural, creative and financial industrial park, which conforms to the trend and strategy of the government to encourage the development of small towns with characteristics. For the company, the development of Xiaoguishan Industrial Park can effectively integrate and utilize the land resources of the member enterprises of the Power Construction Group and lay the foundation for the more effective integration of the group's land resources in the future; at the same time, it is also a useful exploration for the company to actively explore and develop the construction and operation of cultural and creative industrial parks, which is conducive to the company's cultivation of new profit growth points and is in line with the company's future development strategy.
Profit forecast and investment advice. It is estimated that the EPS of the company from 2017 to 2019 will be 0.05,0.08 and 0.11 yuan respectively, and the net profit of homing will maintain a compound growth rate of 62.4% in the next three years. At present, the valuation of the company is relatively high, but we believe that the company is expected to benefit from concepts such as "state-owned enterprise reform" and "characteristic town". Its performance is more flexible, covering it for the first time and giving it an "overweight" rating.
Risk hint: real estate regulation and control risk; project schedule may not meet expectations.