The company is the developer of Zhangjiang Science City and has a state-owned investment background in Shanghai. The company has outstanding industrial operation and service capabilities, and has grown together with Zhangjiang Science City. At the same time, it has laid out key industries through industrial investment and nurtured many technology enterprises through the 895 incubator, so it can enjoy the dividends of industrial development. Since 2021, the policy has continued to expand the planned area of Zhangjiang Science City and relaxed the planning restrictions for comprehensive industrial land use, which has also helped the company grow to a certain extent. In the medium to long term, the company's most important advantage is the advantage of industrial clusters in the Zhangjiang region, and there is a possibility that its stock assets will continue to be revitalized.
A comprehensive industrial operation platform with a state-owned capital background, and the industrial agglomeration effect makes the park stand out. The company is a park developer under the State Assets Administration Commission of Shanghai's Pudong New Area. In recent years, it has accelerated the transformation from a real estate operator to a comprehensive industrial operation platform. In the current context of increasing homogenized supply in industrial parks and relatively weak demand, the company's deeply cultivated parks mainly serve emerging industries with broad prospects, such as integrated circuits and biomedicine, and the operating performance of the company park is clearly better than that of the entire industry.
The company's operations are rising steadily, and the financing channels are smooth. In the first three quarters of 2023, the company's operating income was 1.75 billion yuan, up 7.1% year on year; gross profit was 1.15 billion yuan, up 16.2% year on year, gross margin was 65.9%, up 3.8 percentage points over the full year of 2022; net profit was 760 million yuan, up 3.6% year on year, and net interest rate was 43.7%. The company's overall business situation is on a steady upward path, and profitability has improved. The company's financing channels are smooth. Since 2023, it has raised a total of 5.3 billion yuan in capital through diversified financing methods. The company's comprehensive financing cost in 2022 was 3.3%, a year-on-year decrease of 29 bps.
A three-dimensional industrial investment system to share the dividends of industrial development. The company uses a “direct investment+fund+incubation” approach to gather market resources to promote industrial development. By the end of June 2023, the company's cumulative industrial investment scale had reached 8.713 billion yuan. The 895 incubator has incubated many technology enterprises using the “incubation first, then investment, incubation and investment linkage” method. 2020-2022 was the peak of the company's foreign equity investment, with a total investment of 4.7 billion yuan. Among them, there is no shortage of high-precision enterprises supported by national policies, covering integrated circuits, biomedicine, artificial intelligence and other industries.
With the continuous development of investment enterprises, the company also uses this to share the dividends of industrial development.
With equal emphasis on development and operation, the REITs platform helps revitalize existing assets. The company's business is mainly real estate sales and leasing. In the first three quarters of 2023, the company's sales revenue was 960 million yuan, down 9.0% year on year; leasing business revenue was 770 million yuan, up 35.7% year on year. It is expected that as the completion of the company accelerates in the next three years, the scale of the company's sales and leasing business is expected to grow steadily. The company has outstanding industrial operation service capabilities and can provide supporting services throughout the life cycle for enterprises in the park. The industrial agglomeration effect in the Zhangjiang sector is obvious, and both rent and rental rates are at the leading level in Shanghai. In June 2023, the Zhangjiang Industrial Park REIT expansion was launched, which also helped revitalize the company's assets.
The development space of the park is broad, and the policy brings new development opportunities. In July 2021, the Shanghai Municipal Government issued the “14th Five-Year Plan for the Development of Zhangjiang Science City in Shanghai”, expanding the planned area of Zhangjiang Science City from 95 square kilometers to 220 square kilometers. In July 2023, the Shanghai Municipal Bureau of Planning and Resources, the Pudong New Area Government, and the Shanghai Science and Technology Innovation Office jointly issued the “Pilot Opinions on Promoting Science and Technology Innovation and Integrated Industrial Development Plan Land Management in Zhangjiang Science City”. The policy focuses on introducing new industrial land (M0 land), which allows mixed configuration of functions such as industry, R&D, warehousing, and public service facilities. The policy has freed up flexible planning space in Zhangjiang Science City, while also making it possible to transform existing projects.
Risk factors: Risk of fluctuations in sales revenue carry-over due to fluctuations in completion and sales prices; risk that leasing business revenue may fall short of expectations due to a decline in rent and rental rates; risk that investment returns may fluctuate; risk that stock asset revitalization will not progress as expected; risk that implementation of the new industrial land use (M0 land) policy will not progress as expected; risk that implementation of the new industrial land use (M0 land) policy will fall short of expectations.
Profit forecast, valuation and rating: The company is the developer of Zhangjiang Science City and has a state-owned investment background in Shanghai.
The company has outstanding industrial operation and service capabilities, and has grown together with Zhangjiang Science City. At the same time, it has laid out key industries through industrial investment and nurtured many technology enterprises through the 895 incubator, so it can enjoy the dividends of industrial development.
Since 2021, the policy has expanded the planned area of Zhangjiang Science City and piloted M0 land in Zhangjiang Science City, freeing up space for the company's future growth. The company has high-quality assets and successfully issued the Zhangjiang Industrial Park REIT, opening up a closed loop of asset investment and financing management. Considering that the projects under construction of the company are expected to be completed within the next three years, the marketable resources are sufficient, and the scale of rental properties is expected to continue to grow, we are optimistic about the long-term investment value of the company. We expect the company's 2023E/24E/25E EPS to be 0.66/0.72/0.83 yuan/share. Considering that the company holds some of the shares in many unlisted companies through industrial investment, it is difficult for us to accurately assess the value of these shares for the time being, so we will not give the company a valuation rating for the time being.