Main points of investment:
The company publishes its semi-annual report for 2017. During the reporting period, the company realized operating income of 3.24 billion yuan, down 18.2% from the same period last year; net profit belonging to shareholders of listed companies was 275 million yuan, down 25.0% from the same period last year; and realized basic earnings per share of 0.24 yuan.
In the first half of 2017, due to the decline in property carry-over, the company's revenue decreased by 18.2%; in the same period, the lower gross profit margin widened the decline in net profit to 25.0%. From January to June 2017, the company realized real estate leasing income of 629.7887 million yuan, trade logistics business income of 2.1639145 billion yuan and real estate sales income of 80.9303 million yuan. During the reporting period, the company pre-sold the first batch of houses in Senlan Mingxuan Phase II (A12-1 residential project). As of the date of disclosure of this report, the sales contract area is about 346000,000 square meters, the signed amount is 1.9 billion yuan, and the rebate amount is 1.2 billion yuan. During the reporting period, the park completed and delivered about 2258 thousand square meters of property (excluding Waigaoqiao bonded Logistics Park). First, relying on the pilot project of the "non-special" cosmetics filing reform in the Pudong New area, the experience Hall of the Waigaoqiao International Cosmetics Exhibition and Trade Center has been built; the second is to serve the "Belt and Road Initiative" national strategy, focusing on building national (regional) commodity centers along the route; the third is to strengthen the construction of one-stop professional trade and logistics service platforms for alcohol, cosmetics, watches, machine tools, medical devices, automobiles, construction machinery and so on. The turnover of Wenchuang China Operations Center increased by 12% compared with the same period in 2016.
Investment advice. We will benefit from the reform of state-owned assets and the construction of free trade zones and maintain the rating of "increasing holdings". At present, the construction of Shanghai Free Trade Zone has become a national strategy, Waigaoqiao and even the joint-stock company will become the core platform of the global strategy, and the fundamentals of the company have entered 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 2017 and 2018 is 0.81 and 1.09 yuan respectively. Compared with the revaluation of factors of production under the Hong Kong free port policy, we expect that the value of the company's assets will significantly benefit from the promotion of the free trade pilot zone in the future, and receive five major benefits: policy dividends, industrial upgrading, land price revaluation, positioning change and function upgrading. Considering that the company will benefit from Shanghai's state-owned assets reform and the construction of the free trade pilot zone, 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 2017 is about 27 times PE, that is, 21.87 yuan as the company's six-month target price, maintain the "overweight" rating.
Risk Tip: the company is facing the risk that the lease and sale is not as expected.
