2017 the performance forecast profit came from the realization of land, and the endogenous growth failed to continue the 2017 company's forecast profit of 1.33 billion yuan, an increase of 73.3% over the same period last year, but the net profit after deducting 77 million yuan was reversed over the same period last year, but compared with the net profit of 0.90 trillion yuan after deducting non-profit from 1H17/3Q17, the main business of 4Q17 lost 64 million yuan in the quarter, although the loss narrowed by 27 million compared with the same period last year, but the improvement trend weakened.
Therefore, although the 2017 forecast performance of 1.33 billion yuan is higher than our previous profit forecast of 1.2 billion yuan, we still maintain the previous target price and "overweight" rating.
The pace of land realization is still the core of the company's valuation, and it is difficult to predict one-year profits. since the sale of shares in Nanjing China Reserve Real Estate Company in 2014, the company's profits mainly rely on land transfer subsidies or the sale of shares in subsidiaries that own land. From 2014 to 2017, the net profit of the company vested in the parent company was RMB 546 million, while the net profit of the non-deduction vested in the parent company in the same period was RMB 0.87 million. In essence, the warehousing business operated by the company uses civil construction and equipment as the means of production to obtain the corresponding return, and the land realization is to discount the return at one time. According to the company's annual report, it owns more than 6 million square meters of land, and the direct transfer of part of the land is a mode of realization, but it will make the single-year profit more difficult to predict. Therefore, this pre-profit does not reflect the change of the company's value.
There are bright spots in the business, but the endogenous growth trend slows down.
We are optimistic about the intelligent logistics industry laid out by the China National Reserve Nanjing Wisdom Logistics Company, whose "car-free carrier" business has a mature model and a successful company overseas. CH Robinson is the largest trucking company in the United States, with a revenue discount of 97.1 billion yuan in fiscal year 2017 and a market capitalization of more than 83 billion yuan as of January 31. Relying on its own huge warehousing business and mastering the starting point of logistics, China Storage can provide a supply of goods for a large number of fleets and has a good foundation for the development of "car-free carrier" business. At the same time, the improvement of road transport capacity has significantly improved the company's "door-to-door" distribution capacity, which plays a role in promoting business such as storage and warehousing. However we believe that the business can not provide significant profitability in the short term and the growth rate slows down obviously with the saturation of distribution demand accompanied by the transformation of the original supply of goods.
Management efficiency needs to be improved, and the reform of state-owned enterprises may be possible.
As a leading warehousing company of large goods, the company has a large number of warehousing and scarce railway resources, and we think that its management efficiency is average, even after the national logistics real estate leader GLP took a stake in 2015, we did not see any plans to promote the new project. On the other hand, China's logistics industry is undergoing a change from extensive to fine management. In order to ensure the competitiveness of the manufacturing industry, the country is making various efforts to reduce logistics costs. From the point of view of improving the efficiency of existing state-owned enterprises, there is more room for China Reserve to tap its potential. At the same time, its parent company Chengtong Group has been positioned as a state-owned capital management platform, and there is a possibility of national reform in the future.
Downgrade the profit forecast of the main business, maintain the target price and "overweight" rating due to the decline in the growth rate of the main business of 4Q17, we expect the net profit of homing in 2017-2019 to be 1.303 pounds 955 million yuan respectively (the previous value is 12.04 pounds 1.38 billion yuan). However, as mentioned earlier, due to the low correlation between the company's valuation and operating performance, and directly related to how the land value is reflected, we maintain the 10.0-11.0 yuan price and the "overweight" rating in the absence of management changes.
Risk hint: falling commodity prices lead to a reduction in income and a reduction in profit margins.