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:
Maintain the overweight rating and maintain the target price of 15.4 yuan. It is predicted that the annual EPS1.11/1.43/2.07 of the company in 2017-18-19 will increase by 81%, 29% and 45% respectively. At present, the company is rich in settlement resources and high performance certainty. In the future, it will continue to benefit from the acceleration of Wuhan's old reform and the development of Wuhan real estate market, maintaining the company's target price of 15.4 yuan.
The third quarter to maintain a high gross margin settlement, performance release room. In the first three quarters, the company achieved an operating income of 7.06 billion yuan and a net profit of 820 million yuan, which was basically in line with expectations. The gross profit margin in the first three quarters was 26.05%, an increase of 3.68 percentage points over the whole of 2016. Sales in Wuhan are hot in 2016, and projects with higher average sales prices will gradually enter the settlement period, and the company's settlement area is expected to increase significantly in the fourth quarter. With the gradual settlement of projects with high gross margin, the company has more room for recent performance release and higher performance certainty.
Equity incentive demonstrates the company's confidence in development and gathers the joint force of development. The company announced the 2017 equity incentive plan on September 22, and the unlocking conditions are more stringent. In addition, 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 basically the same as the current price, which also showed the company's great confidence in performance and abundant endogenous motivation.
In the third quarter, we newly entered Shenzhen and Chengdu to explore collective land for the reconstruction of rental housing. Wuhan will basically complete the transformation of shantytowns during the 13th five-year Plan period. With the promotion of the old urban reform, the value of the company's land reserve will be gradually released. In the third quarter, the company has newly entered Shenzhen and Chengdu, among which the second part of the Chengdu project framework agreement is 4125 mu of collective land. the company will explore the use of collective construction land to build rental housing and provide a new development model for the company.
Risk hint: the progress of regulation and upgrading and old reform projects in Wuhan is not as expected.
