Sina tip: This is a research report column, which is only an analyst's personal views and opinions on a stock, not a formal news report. Sina does not guarantee its authenticity and objectivity. All effective information about the stock is subject to the announcement of the Shanghai and Shenzhen Stock Exchanges. Investors are respectfully advised to pay attention to the risks.
Weibo Zhongyuan Securities
Key investment points:
The company's main business includes land development, property sales and property leasing. The main business profit rate of land development and real estate sales is higher than the industry average, and the high-end positioning of products has brought good returns to the company.
The business of commercial real estate development and property leasing engaged in by the Company is related to the overall economic development form of China, and is less affected by the national macro-control policies.
The management of the company pays attention to the development of the company from a long-term perspective, and the high-quality land in the existing land reserve will develop commercial real estate for long-term operation. In 2006, the company began to comprehensively promote the transformation of its main business, from simple land development to equal emphasis on land development and project construction.
The major shareholders of the company will inject the new Shanghai International Expo Center into the listed company recently. The return on equity of the new Shanghai International Expo Center is 10.24%. Considering the opportunities brought by the World Expo for the exhibition industry, the asset quality of the new Shanghai International Expo Center is good.
Without considering the change of share capital, it is predicted that the earnings per share of the company in 2007 and 2008 will be 0.40 yuan and 0.45 yuan respectively. Based on the closing price of 23.88 yuan on July 9, the P/E ratios of 2007 and 2008 were 65.53 and 56.47 times respectively, both higher than the industry average. Give the company short-term "wait and see" and long-term "increase" investment rating.
Risk tip: For the real estate industry, the biggest risk is policy risk. Judging from the real estate market trend in the first half of 2007, the possibility of policy regulation in the second half of 2007 is increasing.
We participated on June 29 Lujiazui At the general meeting of shareholders, we listened to the company's business situation and development strategy, and communicated with the company's executives on some issues.
1. Operation
1.1 High profit margin of main business
The company's main business includes land development, property sales and property leasing.
The company's products are positioned at the high-end and have brought good returns. The main business profit margins of land development and real estate sales are 85.40% and 48.46%, respectively, which are higher than the industry average of about 50% and 30%. However, due to problems in the use and positioning of leased properties, the main business profit margin of property rental income is only 47.20%, lower than the industry average of about 80%. According to the change of market demand, the company plans to gradually carry out new use orientation, redecorate and re lease of the original operating properties for lease, so as to improve the lease income.
1.2 Strategic transformation focusing on land development and project construction
The management of the company pays attention to the development of the company from a long-term perspective. The high-quality land in the existing land reserve will be developed into commercial real estate for self sustained long-term operation. In 2006, the company began to comprehensively promote the strategic transformation of its main business, from simple land development to equal emphasis on land development and project construction.
A number of temporary commercial buildings invested and developed by the company have been completed before the end of 2006, with a construction area of about 6000 square meters, most of which have been put into operation. In 2006, there were 3 new projects under construction and 8 projects under construction, with a total construction area of about 370000 square meters. After 2008, these projects will be completed in succession and generate operating income.
In addition, in order to ensure the long-term development of the company, the company started the preliminary planning of a number of follow-up projects at the same time, including Century Metropolis, No. 10 and 11 R&D buildings in the Software Park, plot sn1, 2-11-2b office building, 2-9-1 office building and hotel, with a total construction area of nearly 500000 square meters.
1.3 Analysis of income sources in 2007
In terms of land development, the company plans to transfer 1-2 plots in 2007, and complete contract advance payment of 1.854 billion yuan. In April 2007, the company agreed to transfer the land use right of Tangdongbei TD-1 plot to China Petrochemical Corporation, with the transfer amount of 1.5 billion yuan. The transfer of the land use right has completed more than half of the company's annual plan, and the annual land development business plan can be basically realized.
At present, the company's property is in good rental condition. The rental rate of office buildings in Lujiazui area is more than 95%. In 2007, the company will successively complete commercial real estate projects of about 150000 square meters. It is expected that the growth rate of the company's property rental income will reach about 10% in 2007 and 20% in 2008.
In terms of real estate sales, the company's product orientation is mainly high-end. In addition to commercial real estate, some international apartments have been developed for residential products. At present, about 100000 square meters are under construction.
It is worth noting that the major shareholders of the company will inject some good assets into listed companies in the near future. Shanghai Lujiazui Exhibition Development Co., Ltd., a joint venture subsidiary of the Company and its controlling shareholder Shanghai Lujiazui Group Co., Ltd., each holding 50% of the shares, plans to acquire 50% of the shares of New Shanghai International Expo Center Co., Ltd. from Lujiazui Group Co., Ltd. Although the acquisition still needs the approval of the Shanghai SASAC and the consent of the partners, the strong support of the major shareholders for the company's operation is obvious, which creates conditions for the improvement of the company's performance.
The operating income of the new Shanghai International Expo Center planned to inject into the company in 2006 reached 368 million yuan, and the net profit was 139 million yuan. Calculated according to the equity ratio, the company's net profit could be increased by about 6%.
According to the assessment, the value of all shareholders' equity of Shanghai International Expo Center is 1.357 billion yuan, and the return on equity is 10.24%. Considering the opportunities brought by the World Expo for the exhibition industry, the asset quality of the new Shanghai International Expo Center is good.
In a word, this acquisition implements the development strategy of transformation of the company's main business, enabling the company to share the opportunities of rapid growth of Shanghai's exhibition industry brought by the 2010 World Expo, and gradually improve the company's overall operating efficiency in the future.
2. Financial analysis
The growth of various financial indicators of the company was not good. The main business income in 2004 and 2005 was negative growth, and the growth rate in 2006 was 56.32%. The substantial growth in 2006 was mainly due to the company's holding company's profit settlement in land lease and property sales.
The company's asset liability ratio, current ratio, quick ratio and other solvency indicators are significantly better than the industry average. A lower asset liability ratio means a lower equity multiplier. As a result, although the gross profit rate and net profit rate of sales of the company in the first quarter of 2006 and 2007 were better than the industry average, the return on equity of the company was unsatisfactory.
3. Profit forecast
According to the company's project construction progress and the development trend of the real estate market, without considering the impact of future major shareholders' asset injection and equity changes, the company's earnings per share in 2007 and 2008 are expected to be 0.40 yuan and 0.45 yuan respectively.
4. Investment suggestions
Based on the closing price of 23.88 yuan on July 9, 2007, the company's P/E ratio in 2007 and 2008 was 59.70 times and 53.07 times respectively, and the PEG in 2007 was 2.39. At present, the average P/E ratio of major residential real estate companies in the market in 2007 is 42 times, which is the same as that of commercial real estate developers Financial Street and China International Trade The average P/E ratio in 2007 was 54 times. Give the company short-term "wait and see" and long-term "increase" investment rating.
5. Investment risk tips
For the real estate industry, the biggest risk is the policy risk. In countries around the world, governments are to some extent responsible for solving the housing problems of urban residents. Judging from the real estate market trend in the first half of 2007, we expect that the central government will still introduce policies to regulate the order of the real estate market in the second half of 2007. Some projects developed by the company will be affected.
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
