Event: China Reserve issued a pre-increase announcement on its annual performance in 2017, which is expected to achieve a net profit of 1.33 billion yuan in 2017, an increase of about 73% over the same period last year. Among them, the deduction of non-net profit is about 76.72 million yuan to turn losses into profits.
The company actively expands the revenue scale of the main business, and effective cost control helps the main business to turn losses into profits. In 2017, the company seized the opportunity to actively expand its main business, and the scale of revenue gradually expanded. The annual income was about 2.5102 million yuan, an increase of 64% over the same period last year. At the same time, the company strengthened the control of expenses. The growth rate of sales and management expenses was lower than that of income, resulting in an increase in profits. The total profit of the main business for the whole year was about 102 million yuan, and the impact on the net profit of homecoming was about 76.72 million yuan. Compared with the same period last year (- 27.28 million yuan), it turned losses into profits.
The non-recurrent profit and loss of equity exchange is the main reason for the substantial increase in the return net profit of the company. In 2016, the non-recurrent profit and loss of contributing profits included compensation income from land demolition and investment income from equity exchange, among which, the non-operating income from land demolition decreased significantly, and the net profit of land demolition in 2017 and 2017 was 779 million yuan and 233 million yuan, respectively. During the company period, the transfer of the 100% equity held by China Reserve Real Estate Development Co., Ltd. and Tianjin China Reserve Hengsheng Real Estate Co., Ltd. obtained an investment income of 1.409 billion yuan and contributed 1.057 billion yuan to its mother's net profit.
The company's new business, new strategy and new direction are promoted in an orderly manner. The company began to actively expand intelligent logistics, logistics real estate and other new business, among which, the company is committed to building China's largest "car-free carrier" platform "Zhongchu Zhiyun platform". By the end of June, the operating income had reached 2.35 billion yuan, the transaction volume was 2.798 billion yuan, the transport volume was 33.21 million tons, and the number of registered members had exceeded 50, 000. The company's commercial real estate project continues to move forward, the Shijiazhuang Central Reserve City Plaza project is open to the public, the Nanjing China Storage Power Construction Project has begun to be pre-sold, and the construction of the logistics base has been promoted in an orderly manner.
Investment advice: the company's main business profitability will gradually recover, and the land realization income will continue. It is estimated that the company's EPS in 2017-2019 is 0.62,0.35 and 0.43 yuan respectively, and the PE is 17x, 30x and 25x respectively. We are optimistic about the development of the company in the long term, but in the short term, considering that the company's performance is greatly affected by commercial real estate factors, we maintain the company's "overweight" rating.
Risk hint: falling commodity prices have an impact on performance and land realisation is lower than expected.
