Main points of investment:
Event one. The company publishes its annual report for 2017. During the reporting period, the company realized operating income of 8.95 billion yuan, an increase of 3.42% over the same period last year; net profit belonging to shareholders of listed companies was 740 million yuan, an increase of 2.36% over the same period last year; and basic earnings per share was 0.65 yuan. The company pays a cash dividend of 2 yuan (including tax) for every 10 shares.
In 2017, the company's property rental and sales maintained a steady and small growth, with operating income increasing by 3.42%, while the company's net profit increased by 2.36% over the same period. According to the company's 2017 annual report, 2985 new enterprises were set up in the park in 2017, with a net increase of 219800 square meters of property rental area. In 2017, the company's Senlan Mingxuan Phase I opened in April 2017, and all the 232 houses sold out, with a total sales value of about 1.938 billion yuan. There are 15 projects under construction in Senlan region for the whole year, with a total construction area of 810,000 square meters, including 5 new projects and 180000 square meters of new construction area. In 2017, the company's parallel import car platform realized parallel import of 1134 cars in the whole year; the International Cosmetics Exhibition and Exchange Center completed 695 "non-special" cosmetic products filing work during the year; the annual import and export volume of cultural art import and export channel is nearly 6 billion yuan; the sales volume of "Wenchuang China" Tmall store is 6.14 million yuan; and the gross profit of the cultural investment company is 7.12 million yuan in half a year. The International Art bonded Service Center project has reached a warehouse rental intention of more than 10,000 square meters with customers. In December 2017, the company plans to acquire 273 million yuan from the controlling shareholder's 50% stake in Shanghai Waigaoqiao Group Finance Co., Ltd.
Event two. The company announced the first quarter of 2017. During the reporting period, the company realized operating income of 2.24 billion yuan, an increase of 55.1% over the same period last year; net profit belonging to shareholders of listed companies was 367 million yuan, an increase of 297.5% over the same period last year; and basic earnings per share was 0.32 yuan. In January 2018, the company plans to sign a "Strategic Cooperation Memorandum" with Beijing JD.com Century Trading Co., Ltd. to create an online and offline integration experience project.
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". At present, the construction of Shanghai Free Trade Zone has become a national strategy, and Waigaoqiao and even the joint-stock company will become the core platform of the global strategy, and the company is positioned as an "innovative free trade park operator and integrated service provider of the whole industry chain". 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". According to the company's 2017 annual report, the company plans to complete a net profit of 746 million yuan belonging to the parent company in 2018. Accordingly, we estimate that the EPS of the company in 2018 and 2019 is 0.68 yuan (corresponding to 769 million yuan of net profit) and 0.78 yuan (corresponding to 886 million yuan of net profit). Considering that the average PE of the comparable company in Shanghai Free Trade Zone is about 29.11 times in 2018, and the asset value of the company will benefit from the process of promoting the free trade zone and benefit from policy dividend, industrial upgrading, land price revaluation, positioning change and function upgrading, we give the company a reasonable valuation space of 28-35 times for PE in 2018, and the corresponding reasonable share price is between 19.04 yuan and 23.80 yuan. In the next six months, we will maintain the "overweight" rating with a target price of 30 times PE in 2018, or 20.4 yuan.
Risk hint: the company's rental and sale business is faced with the risk of policy regulation, and the business development of the park platform is not smooth.
