Viewpoint:

Performance grew the best in the past four years, with earnings per share up 19.98% from a year earlier. In the first half of the year, the company achieved operating income of 458.307 million yuan, an increase of 16.82% over the same period last year, and operating profit of 79.6784 million yuan, an increase of 5.22% over the same period last year. Net profit belonging to shareholders of listed companies was 57.433 million yuan, up 19.98%, and earnings per share was 0.079 yuan, up 19.98%. Net assets per share belonging to shareholders of listed companies. The company's performance has been declining since 2009, with a good increase in net profit in the first half of this year.

The project is well-stocked and the development will continue. The company currently has a land reserve of about 2.44 million square meters, which can meet the development needs of the company for 3-5 years, and the land cost is relatively low. The reserve projects are mainly distributed in the second-and third-tier cities with relatively developed economy, with a high level of purchasing power, large market conditions and market space. High-quality land reserves provide a good guarantee for the future development of the company. In addition to obtaining land through bidding and auction in the secondary market, the company also acquires projects through equity acquisition. The company's Tianxiangxi Park, Wuhan Lijingwan and Jiayuansheng in Qingdao are all acquired through equity acquisitions. At present, the company belongs to the group with strong overall strength and high brand awareness, and the manufacturing industry under the group plays a great role in promoting regional economic development. Therefore, depending on the overall strength of the group, the company has a strong initiative in negotiation when expanding new areas, which is conducive to the acquisition of the company's projects.

The finance is sound, and the financial expenses drop obviously. Last year, the expenses of the company were well controlled, and the management expenses, sales expenses and financial expenses reached 28 million yuan, 11 million yuan and 1 million yuan respectively. Although the sales expenses increased slightly by 4% in the first half of the year, the management expenses and financial expenses decreased significantly, falling by-11% and-72% respectively compared with the same period last year, especially the decrease in financial expenses, which shows that the financial risk of the company is relatively low. The company is financially sound. In the first half of the year, the company's asset-liability ratio is only 55.12%, which is quite sound relative to the high debt ratio of the industry.

Investment advice:

We believe that the company's current layout of the eastern third-tier cities and the economically developed provincial capital cities in the central and western regions has great potential for development. In the future, with the economic growth and social investment in the central and western regions, the demand for real estate will continue to be strong, and the company is expected to harvest a lot in the later stage; in the future, the company will gradually increase the proportion of hardcover houses and commercial real estate, so as to diversify the operating structure, effectively disperse business risks, and improve brand competitiveness; the company will continue to improve management, take the road of fine management, strictly control costs and improve project operation efficiency. In addition, with the steady development of Wolong Group as a whole, Wolong Real Estate, as one of the three major businesses of the group, is expected to enjoy the synergy brought by the interaction between the industry of the group. We estimate that the company's sales revenue from 2013 to 2015 will reach 1.394 billion yuan, 1.765 billion yuan and 2.62 billion yuan respectively, and the earnings per share will be 0.26,0.33 and 0.54 yuan respectively, and the corresponding PE will be 13.15,10.47 and 6.35 respectively. Maintain the company's "recommended" rating