Events. The company publishes its 2018 annual report. During the reporting period, the company achieved a total operating income of 7.776 billion yuan, a decrease of 13.72% over the same period last year; the net profit belonging to shareholders of listed companies was 830 million yuan, an increase of 9.44% over the same period last year; and basic earnings per share was 0.73 yuan. The company pays a cash dividend of 2.2 yuan (including tax) for every 10 shares.
In 2018, due to factors such as the reduction in the sale of real estate, the company's total operating income decreased by 13.72% compared with the same period last year; in the same period, the company's net investment income increased and the real estate transfer gross profit margin was higher, resulting in a 9.44% increase in net profit compared with the same period last year. According to the company's 2018 annual report, in 2018, the company will speed up the cultivation of commercial and trade functions and create a new benchmark for the integration and development of production and city. Senlan businessmen have worked hard to build characteristic businesses with the theme of "Free Trade Cross-Border & New Retail". They have introduced projects such as NetEase koala, SUNING, DIG PLUS and Shibuya Station with cross-border and new retail concepts. 15 new projects have been signed throughout the year, with an overall signing rate of 94%. Sen completed the fine decoration of the hotel apartment during the project; the third phase of the Senlan Shangdu project completed the outdoor overall project; and the innovative concept commercial benchmark complex-the Shanghai Senlan "Garden City" project with a total floor area of 290,000 square meters will be opened in 2019 and will be built into a shopping and office complex with retail, catering, entertainment and innovative experience.
In March 2019, the company plans to contribute 400 million yuan as a limited partner to set up the Shanghai Pudong Science and Technology Innovation Investment Fund. According to the company's 2018 annual report, the company plans to complete a total operating income of 8.867 billion yuan in 2019, with an estimated net profit of 870 million yuan and a return on net assets of 8.3% for shareholders of listed companies. The total investment budget of the planned new project is 6.805 billion yuan, and the planned investment for that year is 2.989 billion yuan.
Investment advice. Benefit from the construction of free trade zone and give the company a "neutral" rating. Adhering to the orientation of "innovative free trade park operator and whole industrial chain integrated service provider", the company builds a new industrial chain industrial system with industrial real estate as the core carrier, commercial real estate as urban space, platform economy as service means, financial services as important support, park service as supporting guarantee and investment promotion as function. According to the company's 2018 annual report, the company plans to complete a total operating income of 8.867 billion yuan in 2019, with an estimated net profit of 870 million yuan belonging to shareholders of listed companies. Accordingly, we estimate that the EPS of the company in 2019 and 2020 is 0.77 yuan and 0.83 yuan respectively. We believe that the company will benefit from the process of promoting the free trade zone and receive five major benefits: policy dividend, industrial upgrading, land price revaluation, positioning change and function upgrading, giving the company a 24-30 times dynamic PE valuation in 2019 and a "neutral" rating corresponding to a reasonable value range of 18.48-23.10 yuan.
Risk hint: the company's rental and sale business is faced with the risk of policy regulation and control, as well as the risk of poor business development of the park platform.
