The land market affects the income decline, the two wings continue to expand, maintain the "buy" rating company on October 27 issued a mid-term report, 2023Q1-3 revenue of 2.61 billion yuan, year-on-year-15.1%; net profit attributable to the mother of 1.03 billion yuan, year-on-year-0.2%; EPS0.69 yuan. The Company has operational advantages in the park development sector, and the two wings business has entered the development period, especially the photovoltaic sector has entered the fast lane, and the future can be expected.

Due to the low operating time of the land market boom exceeding expectations, we lowered the EPS of the company from 2023 to 2025 to 1.05/1.17/1.31 yuan.(The previous value is 1.11/1.23/1.38 yuan); the average PE (wind consistent expectation) of the comparable company in 2023 is 12.7 times, and the target price of the company in 2023 is 12.7 times PE, and the target price is 13.32 yuan (the previous value is 15.32 yuan), maintaining the "buy" rating.

Affected by the boom of the land market, revenue decreased, and net profit attributable to parent company was basically flat year-on-year. During the period, the company's revenue and net profit attributable to parent company decreased year-on-year, mainly due to the slow recovery process of land market in non-core cities and the contraction of the development business of the company's park. The gross profit margin level decreased by 9pct to 50% year-on-year due to the impact of settlement structure. However, the increase in the value-added of industrial fund investment promoted the profit and loss of fair value change to increase by RMB 160 million year-on-year. As the settlement volume of Jiashan Project with relatively high minority shareholders 'equity decreased in the current period, the profit and loss of minority shareholders decreased by RMB 140 million during the period, and the net profit attributable to the mother under the comprehensive influence was basically flat year-on-year.

Overall, the results for the period were mainly affected by the local land market sentiment.

New energy business accelerated layout, photovoltaic installed capacity to 2GW, the company continued to exert efforts in distributed photovoltaic and other new energy fields. Last year, the company invested in the establishment of photovoltaic investment platform Zhongxin Green Energy. In June this year, Zhongxin Municipal Public Utilities officially changed its name to Zhongxin Green Hair to strengthen the development of green business. In the first half of the year, we will further develop the upstream and downstream resource advantages in photovoltaic layout, and establish joint ventures with Singapore Yige New Energy, Shuangjie Electric and other enterprises to jointly expand photovoltaic projects. In 25 years, the new green energy target is 2GW, that is, the annual compound growth rate reaches 168%, and PV is about to enter the rapid growth channel, which is ready for future development. By the end of 2023H1, Zhongxin Green Energy and its joint-stock companies have accumulatively completed grid-connection of 170MW, projects under construction of 65MW and reserve projects of 500MW, making great strides towards the goal of 2GW in 25 years.

Industrial investment continues to exert its strength. The real estate management platform of Zhongyuan District accumulates energy for light asset expansion. By the end of the period, the Company has subscribed 44 industrial investments accumulatively, with an amount of about RMB 4.3 billion. In June this year, the company successfully issued the second phase of 1 billion yuan of innovative start-up corporate bonds with a coupon rate of 2.9%, which is to further expand the industrial investment business. The Zhongyuan project also opens the way for capitalization. The construction scale of Zhongyuan Plate in the Company District is about 2.8 million square meters, with a landing area of 1.72 million square meters. Zhongxinyuan Rui, a real estate fund management platform, was established and completed the investment of Taicang Huangjing Project, the first asset management business, laying a foundation for the listing of REIT and the expansion of light assets in the future.

Risk tips: the land market is down; the Yangtze River Delta economy is down; new energy business expansion is not as expected.