Main points of investment:
The company publishes its semi-annual report for 2017. During the reporting period, the company realized operating income of 3.33 billion yuan, down 2.44% from the same period last year; net profit belonging to shareholders of listed companies was 139 million yuan, down 21.5% from the same period last year; and realized basic earnings per share of 0.13 yuan.
In the first half of 2017, due to the decline in the carry-over of real estate and other properties, the company's revenue decreased by 2.44%. During the same period, the increase in expenses and asset impairment losses expanded the decline in net profit to 21.5%. By the end of the first half of 2017, the company has signed three PPP project agreements, with a total amount of about 3.5 billion yuan. The total area of construction of indemnificatory housing, commercial housing and public infrastructure projects reached 718700 square meters. In the first half of 2017, the company established Zhejiang Gangda in cooperation with Jiangsu Dragonair through Black Peony Real Estate, with a registered capital of 100 million yuan, and the company invested 49 million yuan, accounting for 49%. Construction is about to begin. The Peony International Garden (that is, the Xin Yuewan project) developed by the company has been sold in advance; the green capital Wanhe City is implementing the development of blocks 01, C, D and 02; Suzhou Lanting Peninsula Life Square (that is, Suzhou Dushu Lake Moon Bay Project) has been fully completed and sales are being promoted.
In the first half of 2017, the company's textile business accelerated the construction of "smart factories"; in the same period, the production and sales of denim increased compared with the same period last year. The company participates in a total of 12 equity investment enterprises, and 3 new enterprises are added in this period. Peony Venture Capital participated in the investment to set up Zhongying Assembly, with a registered capital of 80 million yuan, and Peony Venture Capital invested 14.08 million yuan, accounting for 17.6% of its registered capital. Peony Venture Capital invested a further 70 million yuan to undertake the shares of the new original shareholders of Sinosteel, which had increased by 5 million yuan by the end of the reporting period. Peony Venture Capital participated in the establishment of investment aimed at attracting investment and operating parks, with a registered capital of 9.9 million yuan and a Peony Venture Capital investment of 1.98 million yuan, accounting for 20% of its registered capital.
In April 2017, the company issued the outline of the development plan for 2017-2020. In June 2017, the company received a franchise agreement for the Changzhou PPP project with a total investment of about 593 million yuan.
Investment advice. Set textile and clothing, urban comprehensive development, industrial investment as one, to maintain the "holding" rating.
On behalf of the government, the company is carrying out full-service deep ploughing and development of the New North District; the 17.5sq km high-speed rail area and Wanqiang fertile land project during the first phase of construction are progressing smoothly, and the second phase of land development is under way. According to the contract, the company will receive 10% of the project income and 5:5 share of the income. We believe that the New North District, which has a low price-to-income ratio of 439 square kilometers in Changzhou, has only developed 1Compact 5, which has room for expansion in the future. The company promotes textile and clothing to rejuvenate through brand strategy (self-created jeans ERQ brand), and the company's industrial investment is steadily expanding. Therefore, we estimate that the company's EPS in 2017 and 2018 is 0.33 yuan and 0.46 yuan respectively, and the corresponding RNAV is 11.13 yuan. Taking into account the company's fund-raising to enhance the staying power of development, we take the company's RNAV, that is, 11.13 yuan as the company's target price for the next 6 months, to maintain the "overweight" rating.
Risk Tip: the company is facing the risk that the lease and sale is not as expected.
