1. Overview of the incident The company released its 2012 annual report. It achieved annual revenue of 767 million yuan, a year-on-year decrease of 22.82%, and net profit attributable to the parent company of 74.25 million yuan, a year-on-year decrease of 47.36%, and basic earnings per share of 0.10 yuan. Meets expectations. 2. Analyze and determine that revenue and profit declined again. Saleable resources increased in 2013. Revenue growth is estimated to be nearly 70%. After the company's revenue fell sharply by 54.79% in 2011, the company's revenue continued to decline by 22.82% in 2012. The reduction in the company's saleable supply and the significant improvement in the company's sales situation are the main reasons for the decline in revenue. In 2012, the company received 667 million yuan in cash from sales of goods and services, which is equivalent to 634 million yuan the previous year. According to the company's annual report disclosure plan, 490,000 square meters of new construction will be started in 2013, which is much higher than the new construction area in 2012 (about 300,000 square meters). The increase in new construction will increase the company's saleable resources. On the basis of the increase in saleable resources, the company expects revenue of 1.03 billion yuan in 2013, an increase of nearly 70% over the previous year, and the company's performance will improve. Due to promotions and product structure changes, gross margin decreased by 4.66 percentage points. 2013 will improve the company's 2012 gross profit margin by 34.77%, a year-on-year decrease of 4.66 percentage points. Due to the decline in housing prices since 2011, the overall gross margin of the industry has declined, and the decline in the company's gross margin is also related to price reduction promotions. In addition, the main settlement projects in 2012 were Wuhan Regent Bay and Qingyuan Wuzhou Century City, which had relatively low gross margins, while the main settlement projects in 2011, Tianxiang Huating, Tianxiang Xiyuan, and Jinhu Bay were high gross margin projects, and differences in product structure led to a decline in gross margin. The settlement area of the renovated Tianxiang Huating and Jinhu Bay is expected to increase in 2013, leading to an increase in gross margin, and the increase in net profit may be higher than the increase in revenue. The balance ratio increased, and short-term liquidity safety was tight. At the end of 2012, the company's balance ratio was 54.2%, up 8.0 percentage points from the previous year. The balance ratio after excluding advance payments was 52.5%, an increase of 9.7 percentage points over the previous year. The increase is significant, but it is still at the middle level of the industry. The acceleration ratio was 0.72, which was also down from the previous year, but the monetary capital at the end of the period was 531 million yuan, which just covered short-term loans and non-current liabilities due within one year, and short-term liquidity security was tight. No new projects were obtained in 2012. Land reserves were increased through the acquisition of minority shareholders' rights. The company did not add new projects in 2012, but increased equity land reserves through the acquisition of minority shareholders' rights. In 2012, the company successively acquired 49.9% of Qingyuan Wuzhou shares held by Anxin Trust and increased equity land reserves by 655,700 square meters. As of the end of 2012, the company's equity remained unsettled at 2.303,500 square meters, an increase of 27.59% over 2011. The increase in equity land reserves has increased the company's NAV per share and future saleable resources, and we are more looking forward to new projects being recorded in the future, rather than expanding the scale through minority shareholders' equity acquisitions alone. 3. Profit forecast and investment recommendations The company's EPS is expected to be 0.22 yuan, 0.35 yuan and 0.69 yuan respectively in 2013-2015. Corresponding PE is 16X and 10X, respectively. NAV is valued at 5.12 yuan, and the current stock price is 3.43 yuan, at a 33% discount. Give it a “Highly Recommended” rating. 4. Risk warning: Regulatory policies have been strengthened; sales are lower than expected; the company's acquisition of new projects is blocked.