Main points of investment:

The performance is lower than expected and the overweight rating is maintained. In the first three quarters of 2021, the overall operating income of the company was 61.08 billion yuan, an increase of 33.2% over the same period last year. The net profit of shareholders belonging to listed companies was 2.77 billion yuan, down 25.0% from the same period last year. The EPS of 2021 and 2023 is 2.38, 2.55 and 2.79 yuan, respectively, and the target price is 7.14 yuan, corresponding to 3.0X PE in 2021.

Profit margins continue to fall, with real estate and construction "killing". In the first three quarters of 2021, the company's consolidated gross profit margin and net return margin decreased by 2.9pct and 3.5pct to 15.5% and 4.5% respectively compared with the same period last year.

On the one hand, the gross profit margin of real estate settlement projects continued to fall to 17.8%, and the gross profit margin of the construction business also continued to decline to 7.5%; on the other hand, due to the lack of settlement of non-consolidated projects in the first half of the year, investment income fell 41.5% compared with the same period last year. As well as the company's impairment loss of 160 million of assets, the net profit margin of homing fell to 4.5 per cent.

The acquisition of land tends to be cautious, and the certainty of income drops to 1.99. In the first three quarters, the amount and area of land taken by the company fell by 37.3% and 24.3% respectively compared with the same period last year, and the amount of land acquired / sales decreased to 0.21 from 0.27 in the first half of the year. Due to the decline in contract liabilities, the company's revenue certainty fell to 1.99 compared with 2.76 in the same period in 2020.

The debt structure has been optimized and the debt ratio has continued to decline. As of the first three quarters of 2021, the company's interest-bearing debt was 63.7 billion yuan, 16.2 billion yuan less than at the end of 2020, and the company's net debt ratio was 77.6% lower than at the end of 2020 by 19.7 pct. In spite of this, it should also be noted that the minority equity ratio of the company has exceeded 40%, but its profit and loss ratio is only about 12%, so its actual operating risk needs to be treated with caution.

Risk hint: the decline in the proportion of land ownership implies that the profit growth rate is lower than the sales growth rate.