Event: the company released its report for the first quarter of 2017, with operating income of 229 million yuan during the reporting period, an increase of 0.13% over the same period last year, net profit of-64.51 million yuan, compared with-57.68 million yuan in the same period last year, and non-net profit of-68.79 million yuan, compared with-57.76 million yuan in the same period last year. EPS is-0.06 yuan per share.
The cessation of capitalization of borrowing interest led to a year-on-year decline in performance. Similar to the 2016 annual report, due to the suspension of construction of Zhangjiajie Huatian Hotel and Grey Tang Huatiancheng Phase II for more than three months, the loan interest during the suspension of construction has been capitalized into the current profit and loss according to accounting policy, and the financial expenses for the current period are 64.62 million, an increase of 78% over the 36.34 million of the same period last year, directly leading to an increase in the company's current loss.
The impact of the construction suspension is expected to be eliminated in the second half of the year. Due to the recent recovery of the tourism market in Zhangjiajie and a sharp increase in the number of consumers than before, the operating situation of Huatian Hotel in Zhangjiajie has improved. The company expects to restart the construction of Huatian Hotel in Zhangjiajie in June this year and complete the construction by March 2018. The construction of the grey soup project was suspended due to personal reasons of the partner, and the company is negotiating with the other party to resolve it, and the company leadership also attaches great importance to the matter. The provincial SASAC and the new chairman both went to investigate in April and are expected to come up with a solution in the near future.
The gross profit margin improved slightly and the loss of the hotel business was reduced. The company's first-quarter gross profit margin was 59.04%, a slight improvement from 58.23% in the same period last year. Since the fourth quarter of last year, the overall operation of the hotel industry has picked up, and the company's hotel business has also been positively affected, reducing losses to a certain extent compared with the same period last year. In the future, the company will, by means of closure and merger, dispose of some hotels with serious losses and difficulties in reversing losses, and at the same time strengthen market-oriented management concepts and marketing means, and strive to achieve a turnaround in the hotel industry. in the first quarter, the company completed the transfer of Huatian Hotel in Yiyang Yincheng; increase the removal rate in real estate business, invigorate existing properties, and explore the combination of emerging industries and traditional hotel industries.
Investment suggestion: the realization of the company's assets will certainly accelerate this year, and the capital operation will also be put on the agenda. Pay close attention to the new changes in corporate governance when the new chairman of the company takes office, and at the same time pay attention to the changes brought about by the mixed reform of the company. The company currently has a market capitalization of 5.8 billion yuan and a net worth of 2.9 billion yuan. In fact, a large number of self-owned properties and land revaluation have huge room for appreciation. The current share price of 5.71 is similar to the price increase of 5.51 yuan set by Huaxin Hengyuan in November 2015, which is at an all-time low of nearly two and a half years, with a good margin of safety. It is expected that the company will accelerate the realization of loss-making assets and improve its asset-liability structure in the next three years. From this, it is predicted that the EPS for 2017-2018 will be 0.19max 0.34 yuan, with a "buy" rating, corresponding to 30 times PE in 2018, with a target price of 10.2 yuan.