Valuation has a margin of safety, and breakthroughs in emerging industries are worth looking forward to. The company currently has PB 1.3 and is expected to be PE 27 in 2016. The valuation has a certain margin of safety. After the launch was completed at the end of 2015, the company has a strong will to expand into emerging industries, and currently has sufficient cash on hand (report for the third quarter of 2016). The actual controller, the Changzhou Xinbei District Government, holds a total of 59% of the shares. The company's equity structure has room and financial ability to achieve major breakthroughs in emerging industries. Currently, the main direction of focus is intelligent manufacturing and health.
The infrastructure business is developing steadily. Revenue in 2015 was 1.4 billion yuan, an increase of 43% over the previous year, and revenue for the first half of 2016 was 1.13 billion yuan. Gross profit margin increased slightly year by year, and was basically stable at around 10%.
The guaranteed housing business is stable. In 2015, the company's guaranteed housing business revenue was 1.12 billion yuan, an increase of 22% over the previous year. The revenue in the first half of 2016 was 1 billion yuan, a sharp increase of 115% over the previous year. In the past 3 years, the gross margin of the company's guaranteed housing business has stabilized in the range of 13%-14%.
The new PPP business model opens up new space for CITI business. The company obtained 2015-2016 key infrastructure phase I and phase II PPP projects in Xinbei District of Changzhou City in April 2016 and October 2016 respectively. The total investment was 1.2 billion yuan and 1.7 billion yuan respectively, totaling about 3 billion yuan, and the project return level was 10%. The successful expansion of the company's PPP business model will open up new development space for the company's infrastructure business.
Commercial housing business: Signed sales of 2.5 billion yuan in 2016, which will strongly guarantee the company's performance in the next two years.
The sales area of commercial housing in Changzhou in 2016 was 10.64 million square meters, and the average commercial housing transaction price was 7,155 yuan/㎡, up 36% and 11.12% respectively over the previous year. The company signed a contract amount of 2,529 billion yuan for real estate projects in 2016, which will provide a good guarantee for the company's commercial housing business to achieve revenue in 2016-2017.
Investment business: Focusing on emerging industries such as new materials, investment projects are gradually entering a payback period. Projects previously invested by the company, such as Bank of Jiangsu, Changshu Auto Accessories, and Getty Electric, have achieved returns through IPOs or mergers and acquisitions by listed companies. The current investment projects include high-quality projects such as Jixing Technology (supercapacitors), China Steel's new type (graphite material), and Kateeva (OLED), which are expected to reap good returns in the future.
Profit forecasts and investment ratings. The company's 2016 and 2017 EPS are expected to be 0.34 yuan and 0.40 yuan respectively, and the dynamic PE is 27 times and 23 times respectively, giving the company a purchase rating for the first time.
