With a net debt ratio of 4% and low financing costs, the company still has plenty of room to expand its balance sheet.

The company's sales target for 2014 is 10 billion yuan, and it is guaranteed to achieve the sales target.

With the active participation of major shareholders and listed companies, project resources and low-cost financing are being obtained continuously.

Events, investment strategies and recommendations

The company's net profit in 2013 was 459 million yuan, an increase of 7.0% over the same period last year. However, we believe that as the company promotes the acquisition of a stake in the project company owned by the domestic parent company in 2014, its performance is much better than the industry average.

2013 the net debt ratio is only 4%, the company management target is 50%, and there is still room to expand the balance sheet in the future.

The company's 2014 sales target of 10 billion yuan, salable resources of 20 billion yuan, to achieve the sales target is guaranteed. Sales in the first quarter were only 1.14 billion yuan, but it was mainly due to seasonality and more sales resources in the second half of the year. At present, the stock price has digested the negative factors.

The parent company China Merchants Real Estate and the listed company China Merchants Land gradually fulfilled the promise of speeding up development and quickly replenished the project reserves and low-cost financing in existing cities. After listing, the company has replenished 1.435 million square meters of land reserves and issued $500m of credit-enhanced bonds maturing in 2018 at an interest rate of 4.021 per cent, all of which are gradually being cashed in.

Our interpretation

For China Merchants Land, there are three major dividends for future development: 1) the successful experience of the real estate industry of China Merchants Real Estate; 2) the advantage of low-cost financing; 3) the innate advantage of China Merchants Real Estate and even China Merchants Group in obtaining project resources. For real estate companies, all three advantages are crucial, especially when a company with a market capitalization of HK $6 billion, the future development of high-speed is worth looking forward to. At present, the business measures after the listing of the company are gradually verifying this point.

Profit forecast / catalyst

We lowered the company's revenue and profit forecast for the next three years. The company's revenue forecast from 2014 to 2016 is 79.65pm 92.04 / 10.584 billion yuan, and its profit forecast is 8.26amp 9.33 / 1.139 billion yuan respectively. The company's NAV is HK $2.94 per share and is currently trading at a discount of 59.8 per cent to the NAV. The company will not rule out entering new potential cities in the future, which will also be an important catalyst for the company to benefit.

Valuation / risk hint

At present, we still keep the company's target price of HK $2.30, which is equivalent to the 21.7% discount for 10x2014E PUBG E and NAV. Reiterate the buy rating.