Main points of investment:
Event: the company announced its 2016 results.
Real estate sales increased, and business income increased compared with the same period last year. In 2016, the company achieved operating income of 9.477 billion yuan, an increase of 18.8% over the same period last year. Among them, the operating income from real estate sales and leasing was about 6.83 billion yuan, an increase of 11.64% over the same period last year, and the gross profit margin was 27.57%, an increase of 4.99% over the same period last year. The revenue from the environmental protection business was about 2.537 billion yuan, up 26.94% from the same period last year; the gross profit margin was 34.67%, down 0.75% from the same period last year, which was basically the same as last year. The decline was mainly caused by the decline in the gross profit margin of the Yangchen environmental protection business. In the environmental protection business, Yangchen invested about 325 million yuan in sewage treatment and BOT industry, accounting for 12.8% of the total environmental protection revenue, and the gross profit margin was 40.19%, down 1.68% from the same period last year.
The net profit of the real estate business increased significantly compared with the same period last year. The company's real estate business is carried out by the wholly-owned subsidiary Land Group, and its main work is land development, indemnificatory apartment and commercial housing construction, office park, office development and urban village transformation. The net profit of the Land Group reached 916 million yuan in 2016, an increase of 86.56% over the same period last year. By the end of fiscal year 16, the total assets reached 21.703 billion yuan. In the past 16 years, the removal rate of the main real estate is more than 75%, and the sales rate of the first phase of the "Bay Valley" Science and Technology Park has reached 2/3. New high-tech industries such as Huaping Science and Technology, Fudan University, Municipal Design Institute, CITIC Capital and Yang Kechuang have been introduced.
The decrease in investment income leads to a significant decrease in net profit of scale compared with the same period last year. The company's annual net profit was 2.095 billion yuan, a decrease of 42% compared with the same period last year. The decrease in net profit was mainly due to the decrease in investment income from 3.69 billion yuan in 15 years to 1.215 billion yuan in 16 years, down 67 percent from the same period last year. The decrease in investment income is mainly due to the larger investment income from the reduction of financial assets in the same period last year. In 16 years, the company's basic earnings per share were 0.65 yuan, down 42.5% from the same period last year.
The absorption and merging of Yangchen has been completed, and the follow-up separation should be paid attention to. According to the approved trading plan, the company issued A shares to Yangchen B shareholders, and the investment of merging Yangchen by way of stock exchange has been completed. As the surviving party of the merger, the Company Environment Group, a wholly owned subsidiary of the company, undertakes all the assets, liabilities, business, personnel and all rights and obligations of Yangchen Investment. The company plans to separate the environmental company within the next 12 months.
Maintain the "temporary non-rating". With the promotion of the company merging Yangchen B, if the restructuring is successful, the future business of City Investment Holdings, as a surviving party, will be mainly financial and real estate. If we assume that the company completes the stock exchange merger and split business in 2017, that is, the environmental protection business is not included in the performance forecast after 2017, then we predict that the company's future income will mainly come from real estate. We expect the company's EPS to be 1.34 yuan per share in 2017. The suspension price of the company on December 5, 2016 is 20.34, which corresponds to 15 times the PE in 2017.
As the company's absorption and merger transaction has not yet been completed, the transaction is still uncertain, so we do not rate the company for the time being. Risk hint: policy regulation and control of the fundamentals of key cities downward.