Main points of investment:
Events. The company publishes its annual report for 2017. During the reporting period, the company realized operating income of 10.24 billion yuan, an increase of 16.9% over the same period last year; net profit belonging to shareholders of listed companies was 1.41 billion yuan, an increase of 68.0% over the same period last year; and basic earnings per share was 0.57 yuan. The company pays a cash dividend of 0.6 yuan (including tax) to all shareholders for every 10 shares.
In 2017, driven by the carry-over of real estate and an increase in financial investment and leasing activities, the company's revenue increased by 16.9%. In the same period, the decline in expenses and the increase in investment income led to a 68.0% increase in net profit. In 2017, the company achieved steady sales growth, with a signed area of 140.22 million square meters for the whole year, down 3.30 percent from the previous year, and the signed amount was 15.055 billion yuan, up 9.26 percent over the previous year. In 2017, the company started construction (including continued construction) with an area of 395.03 million square meters, with a completed area of 604400 square meters. During the reporting period, the company invested 6.082 billion yuan in real estate. By the end of 2017, Mingcheng Financial Control Group had managed 11.2 billion yuan of assets, including 8.2 billion yuan for medium-term leasing, 2.1 billion yuan for securities investment, 550 million yuan for equity investment and 350 million yuan for financial investment.
In March 2017, the company launched the development and construction of the first new energy industrial park in Taizhou. Since 2017, the company has won rights and interests in the construction of a total of 313,000 square meters of land. In November 2017, the company's wholly-owned subsidiary Mingcheng Equity Fund and Mingcheng Financial Holdings jointly launched the establishment of Hunan Silk Road Industry Investment Fund (limited partnership). According to the company's 2017 annual report, in 2018, the company expects 3.4585 million square meters of new construction area and 107.47 million square meters of completed area, and plans to achieve real estate sales growth of no less than 30 percent over the previous year.
Investment advice. The important target of Fujian free trade zone, "industry + capital two-wheel drive" is worth looking forward to. The company's development model is in line with the direction of new urbanization and is an important target of Fujian Free Trade Zone and the theme of "Silk Road". Sales of famous cities are expected to benefit from tax and financial benefits related to the free trade zone. The East Lanzhou Science and Technology New City project is in the core area of the Silk Road Economic Belt. At present, the company clearly creates the real estate plate and the financial plate two-wheel drive. The company has made it clear that it will actively explore new industries such as financial services, investment and trade, warehousing and logistics, and big culture and health. We estimate that the company's EPS in 2018 and 2019 is 0.68 yuan and 0.83 yuan respectively, and the corresponding RNAV is 9.05 yuan. Considering the great transformation of the company, we value the company at 14 times PE in 2018, that is, 9.52 yuan as the target price for the next six months, and maintain the "buy" rating.
Risk Tip: the company faces the risk of substandard sales and downward sales price.