The decline in gross profit margin and the decline in income from non-consolidated items led to a decline in profits. In the first half of 2021, the company achieved operating income of 38.48 billion yuan, an increase of 29.6% over the same period last year, and a net profit of 1.75 billion yuan, down 14.7% from the same period last year. The main reasons why the growth rate of the company's return net profit in the first half of the year is lower than the revenue growth rate is as follows: 1. The gross profit margin of the real estate and construction business has declined, and the comprehensive gross profit margin has dropped from 17.3% at the end of last year to 16.3% in the current period. Among them, the gross profit margin of the real estate business has dropped by 0.3% to 19.1%. Second, the non-consolidated investment income this year is significantly lower than that of last year, by 1.09 billion yuan.

The sales performance is excellent, and the intensity of land acquisition is declining. In the first half of 2021, the company achieved sales of 109 billion yuan, an increase of 33.9% over the same period last year, ranking 16th on the Corey sales list. The amount of land taken by the company in the first half of the year was 28.95 billion yuan, down 7.1% from the same period last year; the amount of land acquired / sales was 26.6%, down 11.7% from the same period last year, and the intensity of land acquisition decreased.

The proportion of land rights and interests fell to 42% from 62% in the same period last year, which decreased significantly, which is also an important move for the company to reduce its debt. Among the amount of land acquired by rights and interests, the proportion of the third and fourth lines and the first and second lines are 80% and 20% respectively, and the proportion of the third and fourth lines has further increased. The third and fourth lines are mainly located in Jiangsu, Zhejiang, Shandong, Fujian and other coastal provinces with more developed economy. In terms of the first and second line, the company entered the auction in Shenzhen for the first time this year and got a piece of land.

The reduction in leverage continued and the rating rose steadily. In mid-2021, the company's "three red lines"

The target remains yellow. Of these, the net debt ratio was 95.3%, down 2 percentage points from the end of last year, and the improvement in interest-bearing leverage continued; the cash-to-debt ratio was 1.29X, and the company's cash-to-debt ratio after deducting restricted funds was 1.03X; after deducting advance payments, the asset-liability ratio was 77.4%, down 1.3 percentage points from the end of last year. In the first half of the year, United International upgraded the company's main credit rating from "BB-" to "BB", with a stable outlook. Moody's Corporation maintains a "B1" rating with a stable outlook, while S & P maintains a "B+" rating with a stable outlook.

Keep the buy rating and target price unchanged. We forecast that the company's EPS for 2021-2023 will remain unchanged at 2.45 pound 2.98Unix 3.52 yuan, maintaining the buy rating and the target price of 11.34 yuan.

Risk hint: the carry-over of the development business is lower than expected; the regulation of the real estate industry is higher than expected.