Core ideas:

In the first half of 2021, Jianye Real Estate continued to consolidate its leading position in Henan, achieved stable sales performance, increased the intensity of land acquisition, and continuously thickened the soil reserves in Henan region. On the other hand, we will implement the Great Central Plains strategy, promote the listing of Central Plains Construction Industry, help the light assets business such as acting construction expand to the whole country, and the Great Central Plains strategy has made substantial progress. At the same time, under the situation of deleveraging in the industry, taking the initiative to reduce liabilities and optimize the financial structure, Jianye Real Estate as a whole is less dependent on financial leverage, and the security is relatively higher in the current deleveraging situation.

First, heavy asset business remains stable, light asset business development Jianye real estate realized heavy asset contract sales of 31.05 billion yuan in the first half of the province, sales area of 405.2 million square meters, sales performance ranked first in Henan market, compared with the first half of 2020, the sales amount increased by 3.5%, and the performance remained stable. In addition, Jianye Real Estate lowered its sales target of 80 billion yuan to 70 billion yuan in 2021. We believe that the reduction in the sales target of Jianye Real Estate is mainly affected by the overall real estate market in Henan, as the main projects of Jianye Real Estate are in Henan region. in the first half of the year, Henan commercial housing sales totaled 421.5 billion yuan, a year-on-year growth rate of 19.2%, lower than the 38.9% growth rate of the national real estate market in the same period. In addition, affected by the flood and epidemic situation, it is expected that the prosperity of Henan real estate market will also decline in the second half of the year. In the case that the market situation in the first half of the year was lower than expected, Jianye adjusted its annual sales target based on the enterprise's own situation and the expectation of the market in the second half of the year.

In terms of the development of enterprises, Jianye Real Estate continued to stabilize the Henan base area and maintain its regional leading position in terms of asset-heavy business in the first half of the year. Jianye Real Estate accounted for 7.3% of the market in Henan in the first half of the year, and the sales areas were distributed in various cities and counties in Henan Province. The proportion of sales in third-and fourth-tier cities accounted for 62%, which was higher than 45% in the same period last year, reflecting the further ploughing and sinking of Jianye Real Estate in Henan. At the same time, Jianye Real Estate also obtained land reserves in Henan through a variety of ways (especially equity cooperation). It added 6.633 million square meters of land storage in the first half of the year, 81% of which (in terms of area) came from equity acquisitions and cooperation, and more equity cooperation and acquisition of land. as a result, the new floor price in the first half of 2021 was reduced to 1858 yuan per square meter. By the end of the reporting period, the total land reserve of Jianye Real Estate was 56.209 million square meters, which was enough to support the development demand of Jianye Real Estate in Henan market in the next 3-4 years.

On the other hand, in terms of light assets business, Jianye Real Estate gradually landed the "Greater Central Plains Strategy" in the first half of the year, promoting the listing of Central Plains Construction Industry on the Hong Kong Stock Exchange and helping to expand the construction business outside the province. From January 1 to May 30, 2021 (before the listing), Zhongyuan Construction Industry realized 41 newly signed light asset projects, with a new contract construction area of 4.59 million square meters, of which 6 were located in provinces outside Henan Province. the new contract construction area is 520000 square meters. The development of light assets business can not only hedge the potential risks caused by the excessive concentration of layout in Henan region, but also provide greater potential for the company's scale expansion.

Second, operating income has increased steadily, and expenses have declined further.

In the first half of 2021, Jianye Real Estate achieved operating income of 20.36 billion yuan, an increase of 56.4% over the same period last year, mainly due to the increase in carryover brought about by stable sales performance. The realization of gross profit margin was 17.9%, which decreased in the first half of 2020 compared with the same period last year, mainly affected by the price reduction of carry-over projects. first, some of the carry-over projects of Jianye Real Estate adopted a sales destocking strategy to stimulate project sales, resulting in a narrowing of the overall profit margin. Second, property projects sold at a discount during last year's epidemic were delivered in the first half of the year, and gross profit margins declined under the superposition of double factors. However, due to the decrease in Jianye real estate expenditure in the first half of the year, the decline in gross profit margin had little impact on the net profit margin. In the first half of the year, the management expense rate and sales expense rate of Jianye real estate were 3.8% and 3.9% respectively, down 3.2 and 2.4 percentage points from the same period last year. This includes reducing the publicity expenses of naming sponsorship for football and reducing the expenditure of staff costs. The reduction of expenses ensures the realization of net profit.

As the real estate industry enters the era of management dividend, it has become a consensus for enterprises to improve quality and efficiency in management. Jianye Real Estate has achieved certain results in fine management. In recent years, the rate of "three fees" continues to decline, which helps the profit margin to return to the normal track.

Third, take the initiative to reduce debt and reduce short-term debt by 44.1%

In the first half of 2021, under the guidance of deleveraging policies such as the three red lines, Jianye Real Estate took the initiative to reduce its debt and optimized its financial structure. In the case of the maturity of some foreign debts and corporate bonds, Jianye Real Estate on the one hand repaid part of the debt through sales rebates, and the interest-bearing debt dropped to 28.29 billion yuan from 31.3 billion yuan at the end of 2021. The ratio of interest-bearing liabilities to total liabilities also dropped to 19.0% from 21.0% at the end of 2021.

On the other hand, long-term debt has replaced part of the short-term debt, the long-to-short debt ratio has increased from 1.1 times at the end of 2021 to 2.3 times, the proportion of bank loans with lower interest has also increased significantly, and the financial structure has been optimized to a certain extent. Under the dual measures, the pressure on the short-term debt of Jianye Real Estate has been reduced, and the size of short-term debt has been reduced from 15.2 billion yuan at the end of 2021 to 8.53 billion, a decrease of 44.1%. The ratio of short-term debt to cash is stable at 1.9 times. In addition, as Jianye Real Estate mainly relies on operating leverage to pry the scale, the proportion of interest-bearing liabilities is relatively low, in the current situation of tighter financial leverage, real estate enterprises such as Jianye Real Estate will be safer.