The performance was stable in the first half of 2021. Agile reported steady results for the first half of 2021. Core net profit fell 5 per cent year-on-year to 5.1 billion, driven by revenue and disposal earnings, as well as lower gross margins and joint venture profits, as well as reduced capitalisation of interest. Revenue rose 15 per cent year-on-year to 38.6 billion yuan, with property development up 10 per cent and property management and other businesses up 54 per cent. Gross profit margin narrowed 6.2 percentage points to 28.1%, but it is still relatively high in the industry. As Agile sold a number of projects to third parties, disposal income increased by 51 per cent to RMB 4.2 billion-which we believe has improved Agile's financial position. The ratio of sales and general administration is stable at 8%. The company announced an interim dividend of HK $0.5, with a substantial dividend yield of 5%.

The financial situation continues to improve. Thanks to a cautious land acquisition strategy (equity land prices of 10.5 billion yuan in the first half of the year accounted for only 14% of sales in the same period) and management deleveraging efforts, as of June 31, 2021, the company's net debt ratio fell to 45.3%, cash-to-debt ratio increased to 1.2 times, and asset-liability ratio improved to 68.4%. Agile has been raised from yellow to green under the "three red lines" policy. The company's financial costs fell 0.6 percentage points to 5.96%, which in our view will help the company withstand the downward cycle of the market.

Strong attractive valuation and high dividend yield. Considering the possibility of spin-off of Yacheng Group and Agile in 2021 or 2022, the high dividend yield of 13-17% in 2021-2023, and the healthy financial situation, we consider Agile's current valuation (2.7x 2022) very attractive. We maintained an above-market rating but lowered our target price from HK $17.50 to HK $15.00 to reflect depressed sentiment in the physical and capital markets. The main risks of investment include economic slowdown, policy risks and gross margin pressure.