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　　 Changjiang Securities

Event description:

Today, the company announced three announcements: 1) it plans to invest in the establishment of a leather city guarantee company, with a registered capital of 100 million yuan, which will be fully funded in cash by the company to ease the financing difficulties of the merchants of the leather city market; 2) Tong'erbu Lighthouse, a subsidiary of the company, plans to develop and construct Tong'erbu Haining Leather City Phase III Project, with a total construction area of 210000 square meters, a total investment of about 814 million yuan, and a construction period of 2 years. 3) The company authorizes Hubei Jinlian to use the name of "Haining Leather City" in the leather products property of its "Yinhe Hui" commercial complex. The brand franchise time is 2013-2027, and the franchise fee is 30 million yuan/year.

Event comment:

The third phase of Tong Erbao project includes 122600 square meters of brand living hall, 53800 square meters of entrepreneurship park and 34000 square meters of business office. The brand living hall will be fully leased, with an estimated annual rent of 800 yuan/square meter (unit price of building area, the same below). The business park and business office building will be sold, with an estimated unit price of 6000 yuan/square meter and 4000 yuan/square meter, respectively. If it is opened in the fourth quarter of 2014, it will increase the rental income of shops by 24.52 million yuan and 98.08 million yuan in 2014-2015, respectively, At the same time, the sales revenue of 2015 will be increased by about 459 million yuan. We estimate that the expected rental and sales price of the project is close to the rent of the Phase 5 brand living hall and the sales price of the Phase 3 property, and the pricing is relatively reasonable.

This authorization is the exclusive authorization of the company in Hubei Province. We believe that: 1) As Wuhan is under construction and the original leather and fur market has begun to take shape, some fur market names are similar to the full name of the company's trademarks. This time, the company entered the Wuhan market by authorizing the right to use trademarks, which is an important measure for the company to prevent brand infringement and enhance brand influence; 2) Yinhe Hui project is located in Hanyang District, which is close to the downtown area. With a commercial volume of 180000 square meters, it is highly compatible with the company's scale positioning; 3) Thanks to this brand franchise agreement, from 2013 to 2027, the company will increase the franchise fee income by 30 million yuan every year, and is expected to increase the company's performance by 0.04 yuan every year.

We believe that the company's new projects from 2012 to 2014 will ensure the high growth of the company's revenue to at least 2015; Thanks to the company's relatively stable profit model and strong brand investment attraction ability, the expansion of the company's scale can be quickly translated into profit growth. We judge that the company can enjoy high performance certainty from 2012 to 2015. Considering the rapid scale growth and high performance certainty of the company, we believe that the company is a relatively scarce growth product in the retail industry at present (the company will not encounter expansion bottlenecks in the short term), and can enjoy a certain valuation premium. We estimate that the company's EPS will be 1.25 yuan and 1.77 yuan respectively in 2012-2013 (considering that the new franchise fees will increase the company's 13 year performance by 0.04 yuan/share), The corresponding growth rates are 33% and 42% respectively, and the corresponding share prices are 20 times and 14 times respectively, maintaining the "recommended" rating of the company.

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