Event
The company acquired 60% equity interest in Tongchang Shengye (Beijing) Technology Development Co., Ltd. with 160 million yuan, Shanghai Yichang 100% equity stake with 39.948 million yuan, and Shanghai Haofeng equity interest with 28.4 million yuan.
Core viewpoints
Actively lay out the Beijing market and promote the expansion of other places in a down-to-earth manner. The company acquired 60% equity of Tongchang Shengye (Beijing) Science and Technology Development Co., Ltd for 160 million yuan. After the completion of the acquisition, the company shall provide a shareholder loan of 61.308 million yuan to the target company in proportion to its equity to pay the various payables or external debts of the target company. The natural person of the original shareholder and partner promised a total of 260 million yuan for the four-year performance target. The two mature projects operated by the holding company of the target company and the two projects under construction operated by the participating company have a total rental area of 77000 square meters, all of which are located in the core business district of Beijing. After the completion of this acquisition, the underlying company becomes a holding subsidiary of the company and is included in the scope of the consolidated statement. The target company will achieve 95.71 million yuan in revenue in 2020, which is expected to increase the company's performance in the future. At the same time, this acquisition is conducive to the company's strategic layout in the Beijing area and expand the company's business scale.
The acquisition of Shanghai core regional projects to further consolidate the dominant position in the market. With a total consideration of 68.348 million yuan, the company acquired 100% equity interest in Shanghai Haoyi and Shanghai Yichang. The two target companies operate 17 property projects through the leasing operation mode, totaling about 84000 square meters. All the projects are located in and along the Central Ring Road in Shanghai, with superior geographical location and good management. The formats of 17 property projects include office, commercial and some apartments. After the completion of the acquisition, Shanghai Haoyi and Shanghai Yichang will become wholly owned subsidiaries of the company. In the first quarter of 2021, the two target companies achieved a total income of 31.468 million yuan and a net profit of 2.529 million yuan, which is expected to have a positive impact on the company's performance for the whole year. The company's market position in Shanghai has also been further strengthened, in line with the company's strategic positioning of ploughing Shanghai.
Keep the buy rating and target price unchanged. We predict that the company's EPS from 2021 to 2023 will be 0.43 yuan, 0.52 yuan, 0.61 yuan, and 30X in 2021, corresponding to the target price of 12.90 yuan.
Risk hint: the rental rate is lower than expected; the expansion of new projects is lower than expected.