This report is read as follows:
Benefiting from the rise in volume and prices in Wuhan in 2016, the company's rich settable resources will lock in recent profits, and the value of land reserves will be released at an accelerated pace with the promotion of the old urban reform in Wuhan and the development of the real estate market.
Main points of investment:
For the first time, the overweight rating was given. It is predicted that the company's EPS1.11/1.43 in 2017 / 18 will be increased by 81% and 29% respectively. At present, the company is rich in settlement resources and high performance certainty, and will continue to benefit from the acceleration of the old reform in Wuhan and the development of Wuhan real estate market in the future. It is given to 14xPE according to the comparable company valuation method, and the comprehensive RNAV valuation method gives the company the target price of 15.4 yuan.
Sales in Wuhan are hot, and there is a lot of room for performance release. In the past three years, the average settlement price of the company is much lower than the average sales price, and the project settlement is concentrated on the projects with low gross profit margin. Sales in Wuhan are hot in 2016, and projects with higher average prices will gradually enter the settlement period and raise the gross profit margin of the real estate business. The gross profit margin in mid-2017 was 27.62%, an increase of 5.25 percentage points from the end of 2016. At present, the advance payment of the company is mainly concentrated in the projects with high gross profit margin, which has a large space for the release of recent performance and high performance certainty.
The advantages of the old reform lock in the Wuhan market and lay out the core metropolitan area. The company is one of the first companies to participate in the "three old" transformation in Wuhan, and has a large number of old reform projects in Wuhan. At present, the stock-to-sales ratio in Wuhan has dropped to a low in recent years, and with the promotion of the old urban reform, the value of the company's land reserve will be gradually released. In addition to ploughing Wuhan, the company actively enters Beijing, Shenzhen, Chengdu and other core cities, which helps to improve the company's brand positioning and accelerate the company's scale expansion.
Increasing the holdings of major shareholders shows confidence in development, and equity incentives agglomerate the joint efforts of development. From October 2016 to April 2017, the controlling shareholder Fuxing Group increased its holdings by more than 600 million yuan, and the increase price was the same as the current price. in addition, the company's 2017 equity incentive plan unlocking target is more stringent, showing the company's great confidence in the company's performance, there is plenty of endogenous motivation.
Risk hint: the progress of regulation and upgrading and old reform projects in Wuhan is not as expected.