Key points of investment

Incident: Gree Real Estate released a draft to acquire 100% of Zuban's shares: 1) Issuance of shares: Gree Real Estate plans to issue shares to the Zhuhai Municipal State-owned Assets Administration Commission and Urban Construction Group and pay cash to purchase 100% of its total shares of Zhuban Group. The transaction price is 8.978 billion yuan, of which ① the transaction consideration paid by shares is 7.631 billion yuan; ② the transaction consideration paid in cash is 1,347 billion yuan; 2) Targeted capital raising: it also plans to raise no more than 7 billion yuan of supporting capital to issue shares from no more than 35 specific investors to pay for cash consideration and storage room The project or target company's project construction, supplementary working capital, and debt repayment will not be used to acquire land, purchase land, or develop new real estate.

We have been deeply involved in tax exemption for many years, and our profitability is stable. In 2020/2021/2021/2022 M1-11, Zhuban Group achieved revenue of 11.55/17.76/1,513 billion yuan respectively, +53.69% compared with the same period in 2021; Guimu's net profit of 282/5000/170 million yuan, +77.13% compared with the same period in 2021; and Guimu's net interest rate was 24.45%/28.18%/11.25% respectively. In addition, Zhu Xuan promised that net profit to the mother in 2023-2025 would not be less than 502/567/620 million yuan respectively. The duty-free business may become an important profit driver for the company in the future.

After the restructuring is completed, the total share capital of the company is expected to be no more than 4,295 million shares. Among them, it is proposed to purchase assets and issue 1,418 million shares, and the maximum number of shares raised to be issued will not exceed 991 million shares. Based on the maximum issuance volume, the total share capital of the company is estimated to be about 4.295 billion shares after the restructuring is completed. Assuming that the market value before the company's draft announcement included only the real estate business, based on the closing price of the unannounced draft on December 2, 2022, the market value of the company's original real estate business was about 12.3 billion yuan; based on the closing price on March 24, 2023 and the total share capital after the restructuring, the company's implied market value was about 365 billion yuan, of which duty-free assets were about 24.3 billion yuan, corresponding to PE 48/43/39X respectively according to the performance commitment of the company exempted 2023-2025. Pearl's performance promises are conservatively low. The forecast is set by the company based on careful and probable considerations, and cannot fully guide future growth.

The core gate of the Pearl free pass has benefited from the resumption of passenger flow. The Gongbei Port, where the duty-free shops owned by Zhufan are located, connects the Guangdong-Hong Kong-Macao Greater Bay Area. 2023.1.8-2023.2.7, the Zhuhai Entry-Exit Border Control Station inspected a total of about 10.7 million people entering and leaving the port (Hong Kong and Macau), +47.06% compared to the same period in 2019, which has recovered to nearly 70% in the same period in 2019. It is expected that passenger traffic will continue to grow in the context of the relaxation of immigration policies, which will drive an increase in Pearl's sales.

Risk warning: acquisitions fall short of expectations, increased market competition, policy risks, systemic risks