Key points of investment:
The company published its report for the third quarter of 2017. During the reporting period, the company achieved operating income of 939 million yuan, a year-on-year decrease of 38.8%; net profit attributable to shareholders of listed companies was 396 million yuan, which turned a sharp loss into profit over the previous year; and achieved basic earnings of 0.42 yuan per share.
In the first three quarters of 2017, due to the decline in real estate transfers, the company's revenue fell by 38.8%; during the same period, the company transferred shares of subsidiaries to obtain investment income, turning net profit from loss into profit. From January to September 2017, the company's project started an area of 43,900 square meters, a decrease of 12.02% over the same period last year, and the completed area was 81,900 square meters, an increase of 1,506% over the previous year. By the end of September 2017, the company's real estate project had a construction area of 395,000 square meters. From January to September 2017, the company achieved a contracted sales area of 61,800 square meters, and achieved a contracted sales amount of 608 million yuan, a year-on-year decrease of 69.66% and 68.72% respectively. From January to September 2017, the company's total real estate leasing area was 34827.7 square meters, and the total rental income obtained was 3,3407 million yuan.
In July 2017, the company obtained 65,000 square meters of underground parking area in Nankai District of Tianjin. In October 2017, the company set up two wholly-owned subsidiaries responsible for the development and operation of cloud computing and information industrial parks. The company's 2016 annual report revealed that in 2017, the company plans to invest about 2,366 million yuan, including 1,452 million yuan for real estate development, 686 million yuan for Internet investment, and 228 million yuan for equity investment, while increasing the scale of investment in smart cities, the Internet, etc. in due course. The company's real estate business plans to start construction of 275,400 square meters in 2017, complete 244,500 square meters, contract sales of 134,800 square meters, and contract sales of 1,406 million yuan.
Investment advice. Build a new model of real estate+smart city, actively expand into financial leasing, healthcare, and equity investment, and maintain the “increase in holdings” rating. With the majority shareholders' trunk line construction and first-level development capabilities (which helps the company obtain second-level development projects at low cost), the company's real estate has formed a middle and high-end market model for regional development along the main line. In addition to maintaining the competitive advantage of Tianjin's surrounding suburbs, the company is also expanding overseas projects through its majority shareholder advantage. We believe that the company's project reserves currently cover 3.37 million square meters of equity, which can meet development in the next three years. Currently, the company is building a new model of real estate+smart city, and is actively expanding into financial leasing, healthcare, and equity investment. Currently, the company's RNAVs are 8.13 yuan/share. The company's EPS is expected to be 0.73 and 0.28 yuan in 2017 and 2018. Considering the company's business situation, the company was given RNAV as the target price for 6 months, or 8.13 yuan, to maintain the “increase in holdings” rating.
Risk warning: The industry faces two major risks: interest rate hikes and policy regulation.