Key points 1. The performance for the first three quarters fell 82% year on year, and gross margin fell below expectations to 350 million yuan. The company's operating income for the first three quarters was 5.37 billion yuan, up 71% year on year, net profit of 82 million yuan, down 82% year on year, and earnings per share of 0.125 yuan, lower than our expectations; gross margin and net profit margin were 26.7% and 1.5%, down 17 and 12 percentage points respectively. Among them, real estate gross margin is also expected to be around 27%, due to the low gross margin of acquisition projects such as Shanghai Junting and Chengdu Central City State. The gross margin of acquisition projects such as Shanghai Junting and Chengdu Central City State will improve slightly thereafter; The fee rate fell to 10.0% from 11.6% in the previous year. Given that this year's gross settlement margin was lower than our expectations, we lowered the company's annual performance to 350 million yuan. 2. The company's sales were close to 9 billion yuan in the first three quarters, and the company's sales in '17 may continue to soar in the first three quarters. According to previous rules, sales for the first three quarters are expected to be close to 9 billion yuan, of which sales in the third quarter were close to 4 billion yuan, and 86% of the annual 10.5 billion yuan plan has now been completed; according to current sales progress, the annual rate is expected to exceed 10.5 billion yuan, corresponding to a 42% year-on-year growth rate. It will achieve a three-year compound sales growth rate of 69%. Looking ahead to 17 years, the Shenzhen Sungang project, which the company originally planned to sell in '16, will be sold in '17, with a value exceeding 6 billion yuan due to progress, while the Hong Kong Causeway Bay project may also be partially pre-sold. The above two projects alone will add nearly 10 billion yuan in value, so sales in '17 are worth looking forward to. 3. The fixed increase of the company was approved in 2016, reducing debt to help growth, and market value management may strengthen the fixed increase of 3.5 billion yuan for institutions and major shareholders launched by the company in February 2016. The number of shares issued was 245 million shares, and the issue price was 1,431 yuan/share. The actual controller subscribed to no less than 15%. On September 18, the company announced that the fixed increase plan was approved. We expect to receive approval before the end of the year. After successful issuance, the company's net debt ratio will drop sharply from 134% to 43%, helping the company grow. At the same time, in the context of the company's current sharp discount on the company's NAV and the critical time for the company's fixed increase to be approved, the company's market value management will also be strengthened. 4. The value of the first-tier and second-tier high-priced land is constantly increasing. The value of the company's Shenzhen Golden Platform continues to rise, and the value of the Shenzhen North Railway Station Golden Platform project is the highest in the company's land storage. Currently, after compensation, the land book cost is 230 million yuan, which is negligible. However, in June of this year, the floor price of the Longhua Shangtang commercial and residential project reached 57,000 yuan/square meter, directly boosting the value of the company's 90% equity to 20.5 billion yuan, with an incremental contribution valuation of over 20 billion yuan, which once again highlights the scarcity of the company's high-quality land storage. Company in Shenzhen, A large amount of high-quality land in Shanghai, Chengdu, Huizhou, Hong Kong and other places. Compared with the current market value of the company, which is only 13.3 billion yuan, the value of the company is seriously underestimated. 5. Investment suggestions: Performance declined briefly, sales continued to rise, maintaining the recommended rating of Zhongzhou Holdings in Tier 1 and 2 cities, with high-quality stock assets, NAV reaching 24.1 billion yuan. Currently, there are many discounts; at the same time, the company is expanding through land acquisition methods such as market land acquisition, equity acquisition, and majority shareholder injection, all of which have market and non-market-based expansion capabilities, and are expected to achieve more sustained high growth performance; in terms of sales, it is expected that sales will exceed 10.5 billion yuan in 2016, a 42% increase over the previous year, and will achieve a compound sales growth rate of 69% over the past year; in addition, In the current context of the company's NAV sharp discount, the recent approval of the 3.5 billion yuan fixed increase plan may push the company to strengthen market value management and rationally reflect the company's value. At the same time, the company has continuously introduced incentive systems such as 15-year restricted stocks, 16-year employee shareholding, and 16-year project follow-up, to stimulate the company's vitality in multiple dimensions and help the company grow at a high level. In view of this year's gross margin falling short of expectations, we slightly lowered the company's 16-17 earnings per share to $0.52 and $0.89 respectively, maintaining the target price of 24.41 yuan/share, and maintaining the recommended rating. 6. Risk warning: Sales fell short of expectations; the Golden Platform project progressed slowly.