Losses were reduced in the first quarter of 2011. The company released its 2011 quarterly report. During the reporting period, the company achieved operating income of 29.12 million yuan, an increase of 703% over the previous year. Net profit attributable to shareholders of listed companies was 3.14 million yuan, compared to -4.44 million yuan last year, and losses decreased year-on-year. Basic earnings per share - 0.017 yuan, net assets per share - 2.676 yuan.

Project reserves are limited and performance sustainability is poor. Lianhai Company holds 18.75% of the shares in Beijing Tongzhou Business Park Development and Construction Co., Ltd. Last year, the company transferred 50% of the shares and claims held by Lianhai Company, thus withdrawing from land development in Tongzhou Business Park. Currently, the main projects are Lishui Impression of the Dujiangyan Project (with a construction area of 84,000 square meters) and part of the second and third phases of the Smart New City in Anshan, Liaoning. Total project reserves are limited, and there is no guarantee that performance will continue to grow.

The gross margin increased, and the cost ratio declined during the period. During the reporting period, the company's comprehensive gross margin was 15.6%, up 6.5 percentage points from the previous year; the cost ratio for the period was 19.85, down 96.4 percentage points from the previous year.

Sales were basically the same as the previous year. During the reporting period, the company received 65 million yuan in cash from selling goods and providing services, which is basically the same as 69 million yuan in the same period last year.

The balance ratio continues to decline. At the end of the reporting period, the company's short-term loans plus non-current liabilities due within one year were zero, and monetary capital was 204 million yuan. There was no short-term financial pressure. The real balance ratio after deducting advance payments was 6%, down 5.6 percentage points from the beginning of the period.

Maintain a “neutral” rating. We expect the company's EPS to be 0.05 yuan and 0.06 yuan respectively from 2011-2012. Based on yesterday's closing price of 12.01 yuan, the corresponding PE is 240 times and 200 times, respectively. Maintain a “neutral” investment rating.

Risk warning. The risk of increased regulation in the real estate industry; the risk that project sales will not meet expectations.