Event: the company released its 2021 semi-annual report, with operating income of 95.816 billion yuan during the reporting period, an increase of 23.9% over the same period last year, a net profit of 11.989 billion yuan, a year-on-year increase of 9.4%, and a core net profit of 13.15 billion yuan, up 0.8%.

Revenue and profit grew steadily, and the gross profit margin was basically the same as that of 2020. The steady increase in revenue was mainly driven by the increase in the scale of real estate settlement. During the period, the amount of real estate settlement was 87.5 billion yuan, + 19.7% compared with the same period last year, and the corresponding settlement area was 782.1 square meters, + 60.7% compared with the same period last year. In terms of profit margin, the company achieved a gross profit margin of 20.8%, year-on-year-2.1pct, a decline of 0.1pct compared with the end of the 20th year. During the period, the value-added adjustment of the property acquisition corresponding to the company's business merger income resulted in a reduction of gross profit by about 5.33 billion yuan. Excluding the impact of these fair value adjustments on gross profit, the gross profit margin was about 26.4%. The net profit margin was 12.5%, which was 12.5% compared with the same period last year, which was lower than the 2.9pct at the end of the 20th year. As of the end of the period, the contract liability was 319.73 billion yuan, + 31.4% compared with the same period last year, covering 1.39 times the revenue in 2020. In terms of expense rate, the three fees / revenue during the period is 7.0%, year-on-year-4.5pct, sales fee / revenue is 7.9%, year-on-year-0.2pct, sales fee / current sales amount is 2.4%, year-on-year-0.9pct.

The sales increase strictly abides by the investment discipline, and the real estate + business develops rapidly. During the period, the company achieved sales of 320.76 billion yuan, + 64.3% compared with the same period last year, achieved 50.1% of the annual sales target of 640 billion yuan, and occupied a market leading position in many first-and second-tier core cities, with sales of more than 5 billion yuan in 20 cities, including Beijing, Shanghai, Suzhou and other cities. The sales area is 2194.5 million square meters, + 55.2% compared with the same period last year, and the average sales price is 14617 yuan per square meter, + 5.9% compared with the same period last year. In terms of marketable resources, it is estimated that the salable resources in the second half of the year will be 667.5 billion yuan, of which 461.7 billion yuan will be added to the new marketable resources. In terms of land acquisition, the company obtained a total land storage value of 213.5 billion yuan through multi-yuan land acquisition during the period, with a corresponding equity land acquisition area of 1708.0 million square meters. The ratio of land acquisition to land sales in the first half of the year is 37.9%, while the ratio of land acquisition to land sales in the first half of the year is 28.5% from July 2020 to June 2021. Prudent decision-making to supplement high-quality land. The company said that the total amount and pace of land acquisition will be strictly controlled in the second half of the year, the ratio of equity to land sales in the second half of the year is expected to be less than 20%, and the ratio of equity to land sales for the whole year is expected to be within 30%. Sunac Services's income during the period was 3.32 billion yuan, + 85.4% year-on-year, and the net profit of returning home reached 610 million yuan, + 154.4% compared with the same period last year. By the end of the period, Sunac Services had managed an area of 173 million square meters and a contract construction area of 322 million square meters. During the period of financing and innovation, revenue reached 2.61 billion yuan, + 166% compared with the same period last year, of which the ice and snow business developed rapidly. During the period, 7 snow resorts (6 indoor and 1 outdoor) have been opened, 5 indoor snow resorts are under construction, 12 agreements have been signed, and the overall strategic layout of 35 indoor snow resorts is planned.

The capital structure has improved and the rating has been upgraded, and the three red lines have remained yellow. In terms of the three red lines, the asset-liability ratio (excluding advance accounts) is 76.5%, which is higher than that at the end of 20-2.3 pct; the net debt ratio is 86.6%, higher than that at the end of 20-9.4 pct; and the cash short-term debt coverage ratio is 1.11, which is higher than that at the end of 20 + 0.03, maintaining the yellow file. In terms of long-and short-term debt structure, short-term debt accounts for 30.0%, compared with the same period last year-13.9 pct; long-term debt accounts for 70.0%. During the period, S & P upgraded its main rating to BB with a stable outlook, while Moody's Corporation and Fitch raised their rating outlook to positive.

Investment advice: maintain the company's buy rating. It is estimated that the company's EPS in 2021-23 will be 7.96, 8.81 and 10.05 yuan, respectively, and the corresponding PE will be 2.08, 1.88 and 1.65 times, respectively.

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