Core view: The company's core business is the development and leasing of industrial carriers and investment in the technology industry in the Zhangjiang area of Shanghai. At present, it has borne fruit. The construction of the Shanghai Science and Technology Innovation Center depends on Zhang Jiang. The Zhangjiang Hi-Tech Park made every effort to strengthen the three major industries of integrated circuits, biomedicine, and artificial intelligence during the 14th Five-Year Plan period, which is expected to further improve efficiency and growth in China's high-quality development. The company has been deeply involved in the construction of the Zhangjiang area for a long time. As of the end of 2022, the property area used for rent reached 1.33 million square meters. The 3 million square meter property planned to be completed within the next 3 years is expected to bring additional volume to the business. At the same time, the industrial park REIT issued by the company helps the company effectively revitalize its assets and enable the company to have stable investment returns.

The contribution of the company's technology industry investment to performance has remained above 50% for a long time. Well-known investment targets include Shanghai Microelectronics, Minimally Invasive Medicine, Blue Rocket Aerospace, Zhiji Auto, and Minsheng Securities. The promising investment targets are expected to contribute more to the company's performance and valuation.

summary

Deeply involved in the construction of the Zhangjiang area, the scale of property leasing and revenue is expected to grow by leaps and bounds.

The company has been deeply involved in the construction of the Zhangjiang area for a long time. As of the end of 2022, the property area used for leasing reached 1.33 million square meters; regional construction represented by the power collection port, science gate, and northwest Zhangjiang region progressed steadily, driving the company's property rental income to increase. The company's total rent revenue for the first three quarters of 2023 was 770 million yuan, an increase of 35.7% over the previous year. According to the plan, all of the projects under construction with a total construction area of about 3 million square meters will be completed within the next 3 years, which is expected to further increase the size of the company's rental properties and drive the growth of rental revenue.

Use REITs to revitalize assets and improve the exit mechanism to support the company's cash flow and industrial investment capabilities. Through the sale of assets to Huaan Zhangjiang REIT, the company continues to earn profits. The listing of Huaan Zhangjiang REIT in June 2021 brought the company nearly 100 million yuan in revenue; the first batch of successful expansions of Zhangjiang REIT in June 2023 brought the company nearly 400 million yuan in investment income, achieving effective asset revitalization. The company effectively improves the efficiency of capital use through REITs and further accelerates park construction and investment in the technology industry.

Investment income has become the main support for performance, and there are many successful cases. In 2015, the company positioned itself as a “technology investment bank” and actively continued to invest in industry. The contribution of industrial investment income to performance remained above 50% for a long time. The total scale of long-term equity investment and marketable financial assets reflecting the scale of investment had reached 11.27 billion yuan.

The company invests in science and innovation in semiconductor, pharmaceutical, aerospace and other key engineering and emerging industries. Successful cases are frequent, including Shanghai Microelectronics, a leading lithography company; minimally invasive medicine for high-end medical device companies; Blue Rocket Aerospace, a comprehensive aerospace service provider; new energy vehicle company Zhiji Auto; and well-known financial institution Minsheng Securities.

The purchase rating is given, and the company is optimistic about the continued profitability of the company's deep cultivation in Zhangjiang and the development prospects of strengthening technology investment banks. We forecast the company's 2023-2025 EPS to be 0.66/0.80/0.92 yuan, giving it a buying rating.

Risk warning: Property sales and settlement fell short of expectations, property leasing levels fell short of expectations, and development of investment targets fell short of expectations.