The group company is the main force in the urban construction of Shanghai and the integration of the Yangtze River Delta: Li Qiang, secretary of the Shanghai Municipal CPC Committee, conducted a survey of Shanghai Urban Investment Group on April 15, demanding that "Shanghai Urban Investment Group should be the main force in urban construction and operation and management." to highlight high quality in the protection of people's livelihood, actively participate in the transformation of old areas, indemnificatory apartment construction and other tasks, and strive to improve urban quality and provide quality public goods. It is necessary to be a good commando serving the city's major tasks, take the initiative to participate in the construction and operation management of the new free trade pilot area, the Yangtze River Delta integrated development demonstration zone, and related projects of Import Expo, and have the courage to undertake urgent, difficult, dangerous and heavy tasks. We should strive to be the forerunner of the reform and innovation and development of state-owned enterprises.

The company is the forerunner of the reform of state-owned enterprises in Shanghai

City Investment Holdings, formerly known as Shanghai Raw Water Co., Ltd., was restructured into a joint-stock enterprise in July 1992. The company took the lead in mixed reform in 2013. In 2014, the company launched a major unprecedented asset restructuring, absorbing and merging Shanghai Yangchen Investment Co., Ltd. (referred to as "Yangchen B shares"). Yangchen B shares were undertaken by Shanghai Environment Group Limited Company and split into an independent listed company (601200.SH). It was completed in March 2017. After a major asset restructuring in 2014-2017, CIC Holdings has been transformed into a holding group focused on innovative real estate and urban infrastructure investment.

The real estate business is expected to benefit from the integration of the Yangtze River Delta and the land storage of about 450,000 square meters in the demonstration area.

In 2018, the company's real estate sales revenue increased significantly, with real estate operating income of 6.877 billion yuan, an increase of 142% over the same period last year, including a sales area of 80700 square meters, a new sales contract of 2.079 billion yuan and a sales recovery of 5.697 billion yuan. sales recovery mainly from the "Bay Valley" science and technology park, capital and Luxiang Garden and other projects, will continue to be removed in 2019. By the end of 2018, the company had stored 530.3 million square meters, most of which were in Shanghai, of which 450,000 square meters were in the Yangtze River Delta integrated demonstration zone, accounting for 8.49%. More importantly, with the advantages of the group, the company is expected to deeply participate in integrated infrastructure and other market-oriented projects, becoming the core target for medium-term benefits.

The investment business is expected to benefit from the recovery of the stock market and the equity value is expected to increase significantly.

The company's investment business mainly relies on the comprehensive strength and industrial resources of Shanghai City Investment Group, in coordination with the infrastructure plate of Shanghai City Investment Group, and the linkage of Shanghai state-owned enterprises related to the city investment industry chain to seize all kinds of investment opportunities. 1) Chengding Fund is responsible for the venture capital business of the company. Chengding is one of the top 50 private equity institutions in China in 2017. Chengding Fund withdrew a total of 1.717 billion yuan in 2018. Exit the corresponding investment income of 746 million yuan. 2) the latest appreciation of available-for-sale financial assets is nearly 250 million: the company holds Shentong Metro, Everbright Bank, China Railway Construction Corporation, and CIC Capital, and its shares benefit from the recovery of the stock market. It has achieved an added value of 251 million yuan, although fluctuations are not included in the actual profit. But the possibility that the company will achieve part of the income in the future will not be ruled out. 3) the income of the company's shareholding in Western Securities is expected to increase significantly by nearly 350 million: the company holds a 15.09% stake in Western Securities and has directors stationed. Western Securities achieved a net profit of 200 million yuan in 2018, thus increasing the net profit of the city investment company by 30.2 million yuan. Due to the popularity of the stock market, the performance of Western Securities also increased significantly, reaching 583 million in the first quarter, a sharp increase of 199.9% compared with the same period last year. We simply assume that this performance will be maintained in the next four quarters. Western Securities is expected to achieve a net profit of 2.332 billion yuan for the whole year, which is expected to contribute about 351 million yuan to the profit of CIC Holdings, far exceeding last year's 30.2 million yuan.

Investment suggestion: we believe that the integration of the Yangtze River Delta has become a national strategy, and the strength of the policy is expected to continue to exceed expectations. The Shanghai Municipal Government requires the Urban Investment Group, as the main force of urban operation, to actively participate in the construction of the new free trade zone and the integration of the Yangtze River Delta. And the group is the forerunner of the reform of state-owned enterprises and the development of innovative venture capital. The company has 450,000 square meters of land reserve in the Yangtze River Delta region (we think it depends not only on the short-term expectation of land reserve appreciation, but also on the business opportunities brought about by the group's deep participation in the integration of the Yangtze River Delta in the future). The real estate business will grow steadily while the Shanghai market continues to pick up, and the investment business is expected to greatly increase the company's profits (especially Western Securities) when the stock market recovers sharply. We expect the company's net profit from 2019 to 2021 to be about 1.552 billion, 2.263 billion and 3.175 billion, corresponding to EPS of 0.61,0.89 and 1.26 yuan, corresponding to PE of 13.3X, 9.1x and 6.5x, and the company's revaluation of RNAV per share is about 16.26yuan. For the first time, the company is given a "buy" rating, with a six-month target price of 13.0yuan, equivalent to a RNAV discount of 20%.

Risk hint: the real estate regulation and control policy is higher than expected, and the integration policy of the Yangtze River Delta is not as expected.