The company's contract sales in the first half of the year were slightly lower than expected: affected by the decline in the prosperity of the industry and the shortage of mortgage loans, the company's contract sales in the first half of the year was 6.6 billion yuan, an increase of 7% over the same period last year, and achieved the annual sales target of 38%, slightly lower than expected, in line with the industry average. The overall removal rate is about 40%, which is in line with the industry average.
Henan market is stable, and the company keeps its sales target unchanged: the sales of commercial housing in Henan Province increased by 17.5% in the first half of the year compared with the same period last year, which is better than the national market. It is expected that the market will continue to develop steadily in the second half of the year. With the relaxation of purchase restrictions and the loosening of mortgage loans in Zhengzhou, according to market conditions and expected prospects, the company has slightly adjusted the push plan and increased the volume of sales in Zhengzhou. Reduced some poor sales areas of the push plan, the company can sell 20.5 billion yuan in the second half of the year, of which the new push volume accounted for more than 40%, the removal rate of more than 52% of the company can achieve the annual sales target.
Continue to increase market investment in Zhengzhou and Luoyang: the company continues to adhere to the strategy of increasing Zhengzhou's market share. In the first half of the year, the company purchased several pieces of land in Zhengzhou by rock bottom price, and the gross profit margin of the products is expected to be more than 30%. Zhengzhou land reserve accounts for 24% of the total area. In the future, the old reform and shed reform will be the main way for the company to increase the land reserve in Zhengzhou market, so as to ensure a higher gross profit margin of the Zhengzhou project.
The new eighteen city product line is becoming more and more mature: the company has added eighteen city product line. At present, the eighteenth city of Shangqiu has been introduced to the market in the first half of the year, achieving contract sales of 450 million yuan, and the market has responded well. In the second half of the year, the Pingdingshan 18 cities project will also be introduced to the new market, which is expected to become the company's main contract sales contribution project in the second half of the year. The company will expand the Zhumadian Eighteen City project in the first half of the year, and it is expected that this product line will become a new profit point for the company.
Financial soundness: the company's medium-term net debt ratio was 39.5%, up 3 points from the same period last year. Mainly due to the impact of the new issuance of US $200 million in bonds, the company's finance continued to be sound, and the net debt ratio was much lower than the industry average.
Buy the rating, maintain the target price of HK $3.20: despite the large fluctuations in the industry, the Henan market and the company's sales performance are relatively more stable. We maintain the company's performance forecast for the next three years. Due to the company's rising market share in Zhengzhou in the future, the gross profit margin is relatively high, and the company's future gross profit margin is expected to be at a higher level. At present, the stock price is 72% discount to NAV. Corresponding to the 2014-2015 dynamic price-to-earnings ratio of 4.4x and 3.4x, the full-year dividend yield is expected to reach 8.2%, and the valuation is lower than that of companies of the same size. We maintain the company's target price of HK $3.20, corresponding to a 60% NAV discount, and recommend buying.