Summary of the report:
The company is a hotel leader with a long history in Hunan Province, focusing on hotels and supplemented by real estate. Due to the cold winter of the high-end hotel industry since 2013, the performance of the company is at a loss due to the environment.
In 2015, through the introduction of private strategic investors, the company actively carried out high-end pension and other diversified strategic layout. Recently, the management and organizational structure of the company have been greatly optimized, "national reform speed up + management change"
Under the double opportunities, we are optimistic about the further improvement of the mixed reform results in the future, and the company's performance is worth looking forward to.
Deeply ploughing the hotel industry, building up the potential to develop the mid-market, strong willingness to operate assets, and large room for improvement of the membership system. The company ploughs the main business of hotels, with 14 self-operated hotels, 8 contracted hotels and 25 managed hotels. In response to the changing demand, the company has launched the "Huatian Select" brand in the mid-market.
There is still room for improvement in the company's membership system, and the expansion will bring more benefits. The company's own hotel area is more than one million square meters, the market value is 12 billion (as of 16Q3), and the value-added rate is 140%. Carrying out asset operation business (mainly after-sale and leasing of hotel properties) will greatly ease the company's profit pressure.
The construction and removal of existing real estate projects are expected to accelerate, test the water for high-end pension, diversified layout of the next city first. The company lays out the "Huatiancheng Comprehensive Project" in many places in Hunan Province, and waits for the release of the performance under the steady progress of the project. The unmortgaging and unfreezing work of Jin Fang Trade Building has been basically completed, and a pre-sale certificate is being processed, which is conservatively estimated to bring a net profit of 191 million yuan. And relying on the high-quality geothermal resources of Huitang Town, the company will transform the stock hotel into a health residence, and take the lead in layout to create a high-end pension brand.
We are optimistic about the future real estate projects to speed up and diversified layout to bring new vitality to the company.
Profit forecast and investment rating. At present, the company's stock price is upside down at Huaxin Hengyuan's fixed price increase of 5.51 yuan, with a lock period of three years, and the ban will be lifted in November 2018, and the company's stock price is at a relatively historical low, with a certain margin of safety. We estimate that the operating income of the company from 2017 to 2019 is 11.28,13.73 and 1.697 billion yuan respectively, the net profit attributable to the shareholders of the parent company is 1.12,2.31 and 2.72 yuan, the EPS is 0.11,0.23 and 0.27 yuan respectively, and the corresponding PE is 46.76,22.58 and 19.21 times. In terms of PB, it was 1.77,1.72 and 1.66 times in 17-19 years, respectively. We give the company 35 times PE in 18 years, with a target price of 8.05 yuan, giving a "recommended" rating for the first time.
Risk tips: intensified competition in the hotel industry; asset operation is not as expected; real estate regulation and control intensified.