Description of the incident: On May 22, Gree Real Estate announced a fixed increase plan to issue shares and pay cash to the Zhuhai Municipal State-owned Assets Administration Commission and Urban Construction Group to purchase 100% of their tax-free group shares. At the same time, the company plans to raise no more than 800 million yuan in supporting capital from GM China. It is estimated that the number of shares to be issued will not exceed 186 million shares, and the issue price is 4.30 yuan/share. Zhuhai Duty Free is the only wholly owned state-owned enterprise with practical experience in the operation and management of the three major businesses of tax exemption, tax exemption, and bonded (cross-border). It is a group enterprise with duty-free sales as the lead, integrating department store retail, commercial property management, domestic and foreign trade, warehousing and logistics, market management, and the supply of fresh agricultural products exported to Australia. Zhufen is the leading port duty-free market, with the second largest market share in the domestic duty-free industry. After supply-side consolidation of China's duty-free industry, concentration increased further. In 2018, the duty-free market share of Zhuhai was about 6%, ranking second in the industry. Zhuben has a unique location, and the passenger flow advantage is remarkable under the construction of the Guangdong-Hong Kong-Macao Greater Bay Area. Zhuhai is a special economic zone established by the State Council. It is adjacent to Macau in the southeast, and is bordered by the Dingyang in the east and Hong Kong. Under the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, the region is further integrated and developed. At the same time, the diversification of Macau's economy and the rapid development of the Hengqin Free Trade Zone have caused the number of visitors entering and leaving Zhuhai to continue to rise. The Zhufeng category mainly focuses on high-margin tobacco and alcohol, and continuous structural optimization of the category is being expanded. Currently, the duty-free business in Zhuhai is mainly focused on tobacco and alcohol categories. The tobacco and alcohol categories are characterized by high gross profit, which makes the company's net profit margin level far higher than industry standards. However, the tobacco and alcohol categories have a limited audience, and it is more difficult to scale up. Therefore, the company plans to structurally optimize the categories and further expand the scale under the new opportunities brought about by the passenger flow. Duty-free industry: Under policy guidance, the industry is expected to continue to grow rapidly, benefiting from the return of overseas consumption by Chinese people. The national government has introduced a large number of policies to reduce tariffs and guide the return of overseas consumption. As an important means to guide the return of consumption, the duty-free industry ushered in a period of opportunity for development. Chinese consumers spent more than 500 billion dollars on luxury goods globally in 2016. Under the conditions of reduced domestic and foreign price differences and continuous relaxation of tax exemption policies, assuming 10% of consumption returns to the country, the scale of China's duty-free industry is about 2.3 times that of the current Gree Real Estate Group, and strategic enterprise integrating businesses such as real estate, port economy, and marine economy. Deeply cultivate the Zhuhai market and develop diversified business formats. Performance growth has been steady, and debt levels have increased. In terms of liquidity, the company's net operating cash flow changed from negative to positive in 2019, monetary capital also increased, and liquidity conditions improved. The balance ratio is still at a relatively high level, and there is a slight upward trend. Investment advice: Give a “buy” rating. Assuming that Zhuhai duty-free is successfully injected into Gree Real Estate, taking into account the real estate and duty-free business segments, the overall reasonable market value of the company is estimated to be 34-38 billion yuan. Compared with the current market value of 21.3 billion yuan, there is still a lot of room for improvement. According to the company's reasonable market value range, the target price is 9.12-11.06 yuan/share. Risk warning: The epidemic is rebounding, macroeconomic downturn, industry competition is fierce, the acquisition cannot be successfully implemented, and gross margin is declining.