Key points 1. Net profit for the first three quarters fell 23% year on year, and low land costs promoted gross margin continued to rise at a high level. Operating income for the first half of the year was 450 million yuan, up 33% year on year; net profit was only 45 million yuan in the third quarter; net profit was 140 million yuan, down 23% year on year; earnings per share were 0.273 yuan; gross margin and net profit margin were 69.0% and 31.7%, up 2.3 and 22.8 percentage points, respectively. Low land costs drove a sharp rise in gross margin; high gross margin drove a sharp rise in land tax, driving a sharp rise in land tax, driving Business tax and surcharges increased 289% year on year, accounting for operating income from 6.6% last year to 19.3%; the three fee rates increased to 26.6% from 18.1% last year, due to the increase in management expenses and financial expenses due to Oren's merger and the cessation of interest capitalization on some projects, respectively. At the end of the reporting period, the debt ratio and net debt ratio fell to 53% and 33% respectively, far below the industry average. 2. The major restructuring clearly injected Huaxin Securities into equity, estimated the valuation space after the restructuring, or greatly increased the company's trading from August 25 into the restructuring process. Currently, it is clear that the preliminary plan is to set aside some of the company's real estate assets and liabilities, inject Huaxin Securities equity, and implement supporting capital raising. According to an analysis of public information, the actual controller, I&E Group, brother company Filo Audio, and the company hold 66%, 24%, and 8% of Huaxin Securities respectively, with a total of 98% of the shares held by the Department of Instrumentation and Electronics. Therefore, it is expected that after the restructuring, Huaxin Securities will go public almost as a whole. Since the current overall securities asset acquisition plan and supporting capital raising plan have all been announced, it is still impossible to estimate the company's valuation after the restructuring. However, compared with the current three smallest brokerage firms in the securities industry, the market capitalization of Northeast Securities, Guohai Securities, and Baoshuo (Huacheng Securities) has reached 303, 304, and 29.7 billion yuan respectively, so it is expected that the valuation space after the restructuring may increase significantly. 3. The company's land storage is of high quality, with a valuation of 5.5 to 6.6 billion yuan, and some of the assets can be returned to the company holding interest in billions of dollars in cash (developing 890,000 square meters, holding 130,000 square meters). Most of the assets are located in Shanghai. The company acquired land by undertaking instrumentation and electrical industrial land and equity acquisitions. Land acquisition costs were low, and land prices in Shanghai rose, and gross development margin exceeded 60%. We used the net profit discount method for the valuation of the opened property, the cash flow discount method, and the rental return method, respectively, and obtained an RNA566。 However, in this restructuring plan, it is clear that some real estate assets and liabilities will be set aside, and it is expected that billions of dollars in cash can be returned to support the development of the securities business. 4. Investment suggestions: Huaxin Securities has launched, and the valuation space has opened up. It is strongly recommended that Huaxin shares have been suspended since August 25 and entered the restructuring process. Currently, it is clear that the preliminary plan is to place some of the company's real estate assets and liabilities and inject Huaxin Securities shares; currently, after the restructuring, Huaxin Securities holds 98% of Huaxin Securities in total, so after the restructuring, Huaxin Securities will go public almost entirely, and compared with the current smallest brokerage firms in the securities industry, Northeast Securities, Guohai Securities, and Baoshuo Shares (Huacheng Securities) are all expected to have a market value of 30 billion yuan. There may be a significant increase; on the other hand, currently The company holds interests of 1.02 million square meters of commercial real estate. Land acquisition costs are low. The gross margin of undeveloped properties exceeds 60%, corresponding to the company's NAV of about 6.9 billion yuan. Subsequent purchases of some real estate assets will be able to return billions of dollars in cash to support the development of the securities business. We maintain the company's 2016-17 earnings per share at $0.34 and $0.50 respectively, and reaffirm our highly recommended rating. 5. Risk warning: Sales fell short of expectations; asset integration between the company and major shareholders fell short of expectations.