Net profit declined sharply in 2009, in line with market expectations. The company released its 2009 report today: operating income of 430 million yuan, up 37.6% year on year; operating profit of 14.44 million yuan, down 83.6% year on year; net profit belonging to the parent company was 12.9 million yuan, down 93.3% year on year; net profit after deducting non-recurring profit and loss fell 73.4% year on year; basic earnings per share were 0.04 yuan, in line with market expectations. The company did not distribute profits in 2009. A small and medium-sized integrated developer in Nanchang. The company is a small and medium-sized integrated developer based in downtown Nanchang (Donghu District). It is a school-run enterprise (the majority shareholder is Jiangzhong Pharmaceutical Group, the actual controllers are Jiangxi University of Traditional Chinese Medicine, and the Jiangxi State-owned Assets Administration Commission exercises funder responsibilities on its behalf). The company is mainly engaged in residential and commercial real estate development. The core project is Zijincheng. It is a comprehensive project located in Donghu District, covering an area of 383,000 square meters, a total construction area of 1.04 million square meters, and a floor price of 1,300 yuan/square meter, of which the commercial part is 340,000 square meters and the residential part is 700,000 square meters; in addition, the company also has a plot of land in Jingdezhen: located in Guanzhuang Village, Lumeng Township, covering an area of 66,000 square meters. The most obvious characteristic of the 2009 results was “revenue growth and profit reduction”. There are two main reasons: a sharp drop in gross margin of settlement; and a sharp decrease in non-operating income. Gross profit margins have declined sharply. The company's main sales project in 2009 was Zijincheng Residential Phase I, which was opened in March 2009, and sales were good; 5-8 of these buildings were settled during the reporting period, achieving settlement revenue of 430 million yuan, with gross margin of 16%, a year-on-year decline of 45 percentage points. The main reasons were: 1), the market environment was poor when the project (this was also the first batch of residential listings in Zijincheng), and the company carried out discount promotions; 2). The 2008 settlement was mainly the commercial part of the Zijincheng project, with a high gross margin. The decline in gross margin is the main reason for the decline in recurring profit and loss. Non-operating income declined sharply. The company's non-operating income in 2009 was only 500,000 yuan, and in 2008, the non-operating income reached 110.27 million yuan due to “parking spaces to pay off the majority shareholders' debts.” The company's 2010 results will be “restorative growth.” The company settled mainly 2-4 residential buildings in the first phase of Zijincheng. As of the end of 2009, the advance payment was 170 million yuan, covering only 38% of our estimated revenue for 2010 (450 million yuan), and the performance was less certain. As the boom in the housing market in Nanchang rebounded in 2009 and housing prices rose, the company's gross margin of settlement will increase, and such a low gross profit margin (16%) in 2009 can only be phased. Financial health needs to be improved. The company's balance ratio at the end of 2009 was 71.1%, and the actual balance ratio after excluding advance payments was 64.7%. It is at a high level in the industry, and the long-term financial situation needs to be improved. After excluding advance payments, the actual liquidity ratio is 2.8, and the actual acceleration ratio is 0.5, so the short-term debt repayment pressure is high. The company reported a net cash of 340 million yuan at the end of the period, an increase of 270 million yuan over the beginning of the period, of which operating cash flow was 320 million yuan, and the cash situation was fair. Profit forecasts and investment ratings. We expect the company's earnings per share for 2010-2011 to be 0.15 yuan and 0.27 yuan respectively. Based on yesterday's closing price of 8.51 yuan, the corresponding dynamic price-earnings ratios are 55 times and 32 times, respectively. The valuation level is high, and the sustainability of the company's single project and future performance needs to be improved. We maintain the company's “neutral” rating. Risk warning. 1), general market systemic risk; 2), industry cyclical risk; 3), market concentration; 4), settlement progress may fall short of expectations.