Main points of investment:
Events. The company released its third quarterly report for 2015. During the reporting period, the company realized operating income of 5.06 billion yuan, down 8.7% from the same period last year; net profit belonging to shareholders of listed companies was 408 million yuan, down 25.2% from the same period last year; and realized basic earnings per share of 0.36 yuan.
Revenue fell 8.7% in the first three quarters of 2015, affected by a decline in property transfers, while a decline in investment income widened the decline in net profit to 25%. In September 2015, the company issued an announcement on the controlling shareholder and the company's name change. In September 2015, the company publicly listed the transfer of the project under construction in Senlan D4-4. In October 2015, the company acquired a 70% stake in the auto market company. In October 2015, the company acquired a 100% stake in the Culture Investment Company. In October 2015, the company acquired a 0.25% stake in the logistics center company.
Investment advice. We will benefit from the reform of state-owned assets and the construction of free trade zones and maintain the rating of "increasing holdings". Under Prime Minister Li Keqiang's "opening up and forcing reform", Waigaoqiao and even the joint-stock company will become an important strategic core platform company in the world. At present, the construction of the free trade zone has become a national strategy, and the fundamentals of the company's Waigaoqiao will enter a substantial reversal stage. In the future, the company will focus on developing the first phase of the free trade zone, including the port area, logistics area, Senlan Middle Block and Southern Block International Community, in order to achieve "production-city integration". Among them, the Senlan project is 1.3 million square meters (785800 square meters has been started so far), which is expected to bring rich returns to the company. We estimate that the EPS of the company in 2015 and 2016 is 0.74 yuan and 0.91 yuan respectively. Compared with the revaluation of production factors under the Hong Kong free port policy, we expect that the company's asset value will significantly benefit from the promotion of the free trade pilot zone in the future, and will receive five major benefits: policy dividend, industrial upgrading, land price revaluation, positioning change and function upgrading. For this reason, we expect the company's RNAV to reach 42.72 yuan. As of October 30, the company closed at 28.5 yuan, corresponding to a PE of 38.5 times in 2015 and 31.3 times in 2016. Considering that the company will benefit from the reform of state-owned assets and the construction of the free trade pilot zone in Shanghai, targeted financing will speed up the construction of the company's five major platforms, and taking into account that the average PE of listed companies in the Shanghai Free Trade Zone in 2015 is about 53 times, we use 60 times PE in 2015 as the six-month target price of the company, maintaining the "overweight" rating.
Risk hint: the industry faces two major risks: interest rate hike and policy regulation.
