Core views

The company's interim report suggests that the real estate business will gradually be divested over the next 3 to 5 years. Currently, the high-ranking real estate market will stop falling and stabilizing. With the introduction of a series of real estate policy combinations, the popularity of the property market in Tier 1 and 2 cities such as Nanjing is picking up, which will help accelerate the elimination of the company's real estate business and accelerate the transformation and upgrading of the business into a new field of productivity. The company's equity investment business provides the company with stable profit and cash flow, and establishes a solid performance ballast. Venture capital continues to focus on new productivity fields such as biomedicine, information technology, and semiconductors. At the same time, the company recently amended its articles of association to increase the scope of business in the pharmaceutical sector and demonstrate the responsibility of state-owned enterprises through industrial service.

summary

The strategic direction of de-real estate is clear, and the combination of real estate policies accelerates the transformation and upgrading of the company. The company's interim report proposed using 3-5 years to gradually withdraw from the existing real estate business and shift towards investment and operation in the high-tech industry. Since 2023, the company has not added new land reserves, and the focus of the stock project is to promote sales repayment of existing projects. After the Politburo meeting in September proposed to help the real estate market stop falling and stabilize, a series of real estate policy packages were introduced. The popularity of the property market in Tier 1 and 2 cities picked up, the company's stock project elimination is expected to accelerate, and the company's transformation and upgrading in the direction of investment and operation in the high-tech industry.

The equity investment business establishes a solid ballast for profit and cash flow. Since 2019, the company has achieved a total net investment income of 11.3 billion yuan, accounting for 87% of the total profit for the same period; the net investment cash flow inflow for the same period was 2.74 billion yuan, of which the main income and cash inflow came from the Bank of Nanjing. Since 2019, the Bank of Nanjing has contributed 8.58 billion yuan in net investment income and 2.61 billion yuan in cash dividends, building a solid profit and cash flow ballast stone for the company.

The business continues to shift to the field of new quality productivity, and industrial service to the country shows the responsibility of state-owned enterprises. The company is a venture capital pioneer among housing enterprises. It began exploring investment in scientific and technological innovation in 2015, and has deployed a number of high-quality hard-core technology companies, mainly in the fields of pharmaceuticals, semiconductors, and information technology. At present, the company has invested in more than 80 high-quality projects. In addition to venture capital, the company amended its articles of association in November of this year to add business in the pharmaceutical and biological fields to the original business scope, paving the way for the transformation of the company's business into the field of new quality productivity.

The first coverage gave a buy rating, and the target price was $11.34. We are optimistic about the company's investment layout and transformation and upgrading in the field of new productivity. Compared with the company's 2024 PB consensus forecast, 2.08 times. Considering that the company is still in the de-real estate phase, we are giving the company a certain discount on the target valuation, that is, 1.04 times the 2024 PB valuation, corresponding to the target price of 11.34 yuan.