Incident: The company sold projects located in Sanshui, Foshan and Taizhou to Evergrande Group at a total price of RMB 5.425 billion, and is expected to receive a net income of HK$2,912 million after tax; the company sells a project located in Jiangyan, Taizhou to Country Garden at a total price of RMB 361 million, and is expected to receive a net profit of HK$181 million after tax. The company invested RMB 5.5 billion in Evergrande Real Estate and obtained 2.0522% of Evergrande Real Estate's expanded shares. Comment: Our view: The company's strategic investment in Evergrande Real Estate will not have a significant impact on the company; the company will continue to implement the “focus on Shenzhen” strategy. At present, the disposal of third- and fourth-tier city projects has been completed in stages, accounting for only 38% of the area. Over the past four years, the company has acquired a Shenzhen project every year. As housing prices in Shenzhen have risen, the value of the company's land has also increased dramatically. In the future, the company will continue to play its role as a real estate development platform for state-owned enterprises in Shenzhen to achieve results in urban renewal and renovation projects. Under Shenzhen's strict real estate regulation policy, the company's sales will be blocked this year, but currently the company's financial situation is excellent, and there is plenty of cash, so it can wait for the time to buy land. Furthermore, the company maintains a generous dividend policy, with a dividend rate of 30-40% and a dividend yield of more than 5%. We maintain the company's 12-month target price of HK$4.96, which is equivalent to 40% of the NAV discount, equivalent to 12, 11, and 10 times PE in 2017-2019. There is room for 34% increase from the current price, and we maintain our buying rating. Currently, the number of tradable shares of the company purchased through the “Hong Kong Stock Connect” channel has reached 318 million shares, accounting for 4.15% of the issued tradable shares, which shows that mainland investors recognize the company. Strategic investment in Evergrande Real Estate: The company signed investment agreements with Kailon Real Estate and Evergrande Real Estate (both of these companies are subsidiaries of China Evergrande (3333.HK)) through wholly-owned subsidiaries, and invested RMB 5.5 billion to subscribe to Evergrande Real Estate's shares. The subscription ratio accounts for about 2.0522% of Evergrande Real Estate's expanded share capital. Prior to this subscription, Evergrande Real Estate's valuation was 19.8 billion yuan, and the post-investment valuation reached 268 billion yuan. Kailon Real Estate and Evergrande Real Estate promise that Evergrande Real Estate's net profit in 2017, 2018 and 2019 will not be less than RMB 24.3 billion, RMB 30.8 billion and RMB 33.7 billion respectively. Evergrande Real Estate will distribute at least 68% of its net profit in cash to its shareholders during the period of performance of the contract commitment until a restructuring agreement is signed. The company's current equity investment will have a three-year sales limit, and the compound annual dividend yield within three years will exceed 7%. We believe that this investment will not have a significant impact on the company's main business, and the company will continue to implement the “focus on Shenzhen” strategy. Evergrande Real Estate is one of the world's top 500 enterprises introduced by Shenzhen. It has laid out a large number of old reform projects in Shenzhen, and Shenzhen Holdings, as a real estate development platform for state-owned enterprises in Shenzhen, has obtained the main body of “area coordination” for the old reform of many cities. There may be opportunities for the two companies to continue to cooperate in the future. Risk warning: macroeconomic growth is slowing, industry restrictions are being tightened, and company sales fall short of expectations.