Event: the company released its 2021 semi-annual report, with operating income of 34.224 billion yuan during the reporting period, an increase of 30.9% over the same period last year, and a net profit of 2.533 billion yuan, down 14.0% from the same period last year.

The real estate business has seen high revenue growth and profitability has been on the downside since 20H1. The steady increase in revenue was mainly driven by the increase in the scale of real estate settlement, which was 31.578 billion yuan during the period, which was + 39.5% compared with the same period last year, mainly due to the lower-than-expected completion last year and the lag of carry-over to this year. The decline in the company's net profit for the current period is mainly due to a decline in gross profit margin 5.5pct to 25.8%, while fair value change income fell sharply, recording-136 million yuan (- 200000 yuan in the same period last year), and minority shareholders' profit and loss rose sharply, recording 372 million yuan (- 54 million yuan in the same period last year), which is also a further drag on the scale of homing net profit. During the period, the company achieved a net interest rate of 7.4%, which was-3.9pct compared with the same period last year. At the end of the period, the company recorded a contract liability of 86.59 billion yuan, + 6.9% compared with the same period last year, covering 1.21 times the revenue in 2020.

In terms of expense rate, the three fees / revenue during the period is 9.8%, year-on-year-0.4pct, sales fee / revenue is 7.4%, year-on-year-0.9pct, financial fee / revenue is 2.4%, year-on-year + 0.5pct.

Sales increased steadily and the land was prudent, and the property sector was spun off and listed in January. During the period, the company achieved sales of 59.922 billion yuan, + 24.3% compared with the same period last year, achieved 46.09% of the annual sales target, achieved 49 billion of the sales rebate, and the corresponding payback rate was 82%, an increase of 7pct over the same period last year. The sales area reached 516.71 square meters, + 19.0% compared with the same period last year; the average sales price was 11597 yuan / flat, + 4.4% compared with the same period last year. In terms of land acquisition, the company took 123.4 million square meters of land during the period,-40.7% compared with the same period last year, of which the Yangtze River Delta and Pearl River Delta accounted for about 73.2%; the land area was 3.029 million square meters,-35.2% compared with the same period last year; and the floor price was 4074 yuan per square meter,-8.51% compared with the same period last year. The amount of land / sales is 20.6%, year-on-year-22.6pct, there is still more room than the 40% investment-to-sales ratio standard, the management of the company said: the amount of land will be controlled within 40% of the return amount; the floor price / average sales price is 35.1%, year-on-year-5.0pct. At the end of the period, the company recorded a total of 3741.25 million square meters of land storage, with an average land cost of 3252 yuan per square meter, with a corresponding value of 401.4 billion and an equity share of 83.53%. In terms of opening and completion, according to the caliber of the company's performance conference, during the period, the company realized 285.63 million square meters of construction area (58.15% of the annual construction plan) and 327.46 million square meters of completed area (45.56% of the annual completion plan). Overall, the sales side of the company remained sound in the first half of the year, the land-holding side tended to be cautious and the cost of land purchase fell further. From the point of view of diversified business, the 2021H1 of the travel and travel board has recorded a signed area of 359100 parties with a signing amount of 3.077 billion yuan, with a membership size of 2.367 million and a transaction scale of 61.72 million yuan, which has formed a popular residence platform on a preliminary scale. Under the industrial park plate, the scale of attracting investment in the industrial new town is constantly expanding, and high-quality projects have landed one after another. The property sector achieved revenue of 1.807 billion yuan in 2020, + 41.0% year-on-year, net profit of 264 million yuan, + 132.9% year-on-year, 5970.0 million square meters under management, + 18.7% year-on-year, 8057.3 million square meters of contract area, + 4.0% year-on-year and 1.35% joint management ratio. In January 2021, the company's spin-off property sector, 2146.HK, was listed on Hong Kong stocks, raising HK $1.265 billion.

The three red lines are temporarily in the yellow file, and the operating cash flow is steady. In terms of the three red lines, the company's asset-liability ratio (excluding advance receipts) is 70.81% (2.97pct optimized at the beginning of the period), only 0.81pct is short of the standard, net debt ratio is 66.5% (13.68pct is significantly lower than at the beginning of the period), cash-to-short debt ratio is 1.16, and the three red lines are temporarily in the yellow range. Interest-bearing liabilities are 64.978 billion yuan,-3.4% year-on-year, and the average financing cost is 7.82%; structurally, short-term liabilities account for 34.2%, year-on-year-9.7pct; long-term liabilities account for 65.8%, year-on-year + 9.7pct, the optimization of long-term and short-term debt structure is more obvious; the proportion of banks increased to 58%, creditor's rights accounted for 20%, and the proportion of trust decreased to 13.8%. During the period, the net cash flow generated by the company's operating activities was 1.247 billion yuan, which continued to be positive for four consecutive years and the first period.

Investment advice: maintain the company's buy rating, taking into account the decline in profitability superimposed by the industry boom will directly affect the company's future expansion rate, downgrade the company's EPS in 2021-23 to 1.81max 1.89max 2.05 yuan, corresponding to PE 2.77max 2.66max 2.45 times.

Risk hint: the decline of industry sales boom is higher than expected; the tightening of policy regulation is higher than expected.