Events:

In the first half of 2017, revenue was 1.87 billion, an increase of 115.2%, net profit of 250 million, an increase of 144.5%, and basic earnings per share of 0.18 yuan, an increase of 144.58%.

Main points of comment

1. The increase in settlement contributed to a double increase in revenue and net profit, with a high guarantee of annual performance: revenue in the first half of the year was 1.87 billion, up 115.2%, mainly due to the increase in settlement in Tianjin, Xi'an and Hunan; gross profit was 28.2%, down 14.4 points from 42.6% in the same period last year. This is due to the decrease in the settlement of Guangdong Huiyang projects with high gross margins and the increase in the settlement of projects outside Guangdong Province. Gross profit increased by 157 million over the same period last year, with an increase of 42.5%. It led to an increase of 147 million in net profit and 144.6% in return. The results for the whole year can continue to grow, mainly because: 1) 1.64 billion of the accounts received in advance at the end of the period, assuming that the annual revenue is maintained at the level of 3.36 billion, and the settlement in the second half of the year is 1.49 billion, and the guarantee degree of the accounts received in advance is as high as 110.4 percent. 2) for Huiyang, Tianjin and Changsha projects, house prices have risen sharply since 2016, which is currently only reflected in Tianjin and Changsha projects; the Huiyang Zhenye City project is expected to concentrate settlement in the second half of the year, leading to a rebound in gross profit. 3) Phase I and Phase II of Jinhui Park project are basically sold out, with a price of 28000 yuan per square meter for the first phase and 38000 yuan per flat for the second phase. The second phase of the second half of the year is expected to be settled, investment income continues to improve.

two。 The sales payback is good, and the high-quality project is progressing smoothly: the area and amount of equity sales in the first half of the year are 149,000 square yuan and 1.734 billion yuan respectively. The total rebate is 1.855 billion, with a payback rate of more than 100%. The promotion of goods by the company is expected to increase in the second half of the year, but due to the influence of the market environment, there is some pressure for the annual sales to surpass that of 2016. Guangzhou Tiansong Garden, which is expected to be completed in July 2018, is a scarce residential project in the new town of Guangzhou Iron and Steel Co., Ltd., with a floor price of 18255 yuan, the current house price is 45000 yuan, and the equity plan is 169,000 square meters. Zhenye Times Garden is the first Shenzhen-Shantou cooperation zone project, with a floor price of 393 yuan. The house price is expected to exceed 10000 yuan, with a capacity of 217,000 square meters, and construction will start in June 2017. The high-quality project is progressing smoothly, the land value-added dividend will continue to be released, and the performance can continue to grow.

3. Good cost control, ample capital debt ratio hit a new low: the three-fee ratio is 5.9%, 2.8 points lower than in 2016, and the three rates of sales and management have all declined. The significant decrease in the rate of financial expenses is mainly due to the continued decrease in the average balance of interest-bearing liabilities. The monetary capital at the end of the period was 3.66 billion, an increase of 760 million over the beginning of the period, a record high. It is proposed to issue no more than 2 billion medium-term notes to replace corporate bonds and repay loans from financial institutions, which is expected to further reduce financing costs and expand liquidity. The asset-liability ratio at the end of the period, the asset-liability ratio after deducting accounts received in advance and the net asset-liability ratio were 60.4%, 47.8% and 7.5% respectively, down 0.6 points, 0.4 points and 17.7 points respectively. At the low level of industry and history, the solvency is strong, the capital is abundant, and there is much room for the company to expand with leverage.

4. The performance growth is predictable, the regional dividend is significant, and the "highly recommended" rating is maintained: deep ploughing the Dawan area, significant land value-added dividends, smooth progress of high-quality projects, and annual performance growth is expected. It is estimated that the EPS from 2017 to 2019 is 0.82,1.00,1.34 yuan respectively, and the corresponding PE is 10x, 8x and 6x, respectively. Maintain the "highly recommended" rating.

5. Risk hints: the real estate market fell faster than expected, the company's settlement was lower than expected, the performance of Jinhui Park project was lower than expected, and the promotion of Greater Bay area was not as expected.