In the first half of the year, the decline in gross profit margin and the decline in project equity ratio dragged down the performance negative growth, or steady growth throughout the year.

The company has abundant soil reserve resources, continuous improvement of the incentive system (follow-up investment + equity incentive), continuous expansion of scale and accelerated turnover logic at the operational level, substantial increase in sales and consolidated sales in recent years, and gradual improvement in operating cash flow; it is expected that with the further growth of sales and the structural adjustment of fund-raising, the robustness of the company's overall cash flow structure is expected to pick up. In addition, the company is rich in culture and travel resources, and the revenue scale of pure literature travel may be at the level of 10 billion yuan. Overseas Chinese Town Group has also stepped into the top three of the global theme park group, which is optimistic about long-term value. Maintain the "highly recommended-A" investment rating with a target price of 10.4 yuan.

Negative growth in the first half of the year was dragged down by a decline in gross profit margin and a decline in the project equity ratio. The company's revenue / operating profit / homing net profit in the first half of 21 was 23 billion / 3.11 billion / 1.58 billion respectively, which was + 34.4%, 7.7% and 25.9% respectively compared with the same period last year. The high increase in revenue is in line with expectations, mainly due to the continued high growth in sales in the previous two years. However, the comprehensive gross profit margin fell 21.6PCT to 33.3% compared with the same period last year, which is lower than expected. structurally, the gross profit margin of the two segments of business has declined, the gross profit margin of tourism (pure literature travel + development) has dropped by 12.9PCT to 24.8%, and the gross profit margin of real estate development has dropped by 7.6PCT to 73.1%. Second, the proportion of comprehensive tourism income with relatively low gross profit margin has increased. In addition, minority shareholders' profit and loss accounted for a significant increase in net interest rate (related to the decline in sales-equity ratio in previous years), which further lowered the growth rate of homed net profit to-25.9%.

For the whole year, the performance may achieve steady growth. First, the revenue side benefits from the high sales growth in the previous two years, which may maintain the relatively high growth rate in the first half of the year; second, the annual comprehensive gross profit margin may be improved compared with the first half of the year, a. The large decline of tourism comprehensive gross profit margin in the middle of the year has something to do with the carry-over structure, which may improve throughout the year, b. The proportion of comprehensive tourism income with relatively low gross profit margin may fall (normal accounted for about 50% in the past few years and reached 80% in the middle of this year). If the investment income in the second half of the year can maintain the considerable scale of last year, and the profit and loss ratio of minority shareholders increases steadily, the annual performance may grow positively.

At the operational level, the overall stability, of which sales were bright in the first half of the year, slightly worse in July, and the comparable caliber of the cultural and travel business recovered to 84% in 1919.

First, real estate development business. The company's full-caliber sales area / sales from January to July were 2.53 million square meters / 49.9 billion respectively, which were + 34% and 12% respectively compared with the same period last year, and the sales increased steadily, including 44.7 billion in the first half of the year and + 41% in the same period last year. Fifteen new soil storage projects were added from January to July, with a corresponding land amount / area of 22.4 billion / 3.29 million square meters and an average floor price of 0.68 million yuan per square meter, mainly distributed in second-tier cities such as Suzhou / Hefei / Nanjing / Xi'an, as well as Dongguan / Zhaoqing and other cities in the Dawan area. The full-caliber land volume / sales is 45% (86% / 70% for the whole year of 19 / 20 respectively), and the intensity of land acquisition is lower than that of the previous two years, but thanks to the "tourism + real estate" model, the ratio of land performance to price is properly controlled. As of the middle of this year, the company has a full-caliber salable area of about 3000 million square meters, with a corresponding value of 700 billion, which can be developed for about 6 years according to the rolling 12-month sales scale, which is also the result of the company's unique land acquisition model.

Second, the cultural and travel business, which received a total of 28.48 million tourists in the first half of the year, + 160% compared with the same period in 19 years. This is due to the rapid recovery of stock projects and the superposition of the increments brought about by newly opened projects in the past two years. If it is comparable (compared with the project), it has also recovered to 84% of the same period in 19 years, which is better than the industry average.

The financial structure is sound and the "three red lines" are maintained. As of mid-21, the company's book interest-bearing liabilities were 138.1 billion yuan, with a net debt ratio of 75%; the company's cash on hand was 53.2 billion yuan, and the protection ratio for immediate interest-bearing liabilities was as high as 3.2 times, an all-time high; and the asset-liability ratio after excluding advance payments was 69%, roughly the same as at the end of 20 years, and the three red lines maintained the green level at the end of 20 years.

Investment advice: the decline in gross profit margin and project equity ratio in the first half of the year dragged down the performance negative growth, or stable growth throughout the year. The company has abundant soil reserve resources, continuous improvement of the incentive system (follow-up investment + equity incentive), continuous expansion of scale and accelerated turnover logic at the operational level, substantial increase in sales and consolidated sales in recent years, and gradual improvement in operating cash flow; it is expected that with the further growth of sales and the structural adjustment of fund-raising, the robustness of the company's overall cash flow structure is expected to pick up. In addition, the company is rich in culture and travel resources, and the revenue scale of pure literature travel may be at the level of 10 billion yuan. Overseas Chinese Town Group has also stepped into the top three of the global theme park group, which is optimistic about long-term value. Maintain the "highly recommended-A" investment rating with a target price of 10.4 yuan (corresponding to 2021PE=6.0X).

Risk hints: the real estate regulation and control policy is stricter than expected, the company turnover speed is lower than expected, the removal rate of third and fourth line projects is lower than expected, and the comprehensive business development of literature and tourism is not as expected.