Incidents:

The company announced its 2017 semi-annual report on August 24. During the reporting period, the company achieved operating income of RMB 2,102 million, up 53.71% from RMB 1,367 million in the first half of 2016; realized net profit attributable to shareholders of RMB 45 million, up 14.76% from 39 million yuan in the first half of 2016; and diluted EPS was 0.06 yuan per share, up 20.00% over the same period.

Opinions:

Both operating income and net profit increased significantly. In the first half of 2017, the company achieved operating income of 2,102 billion yuan, an increase of 53.71% from 1,367 million yuan in the first half of 2016; in the main business revenue, real estate sales carry-over revenue reached 2,042 million yuan, an increase of 758.992 million yuan over the same period of the previous year, an increase of 59.08%, mainly due to a sharp increase in the completed area of real estate projects that satisfied sales carry-over during the reporting period compared to the same period last year. Net profit attributable to shareholders was RMB 45 million, an increase of 14.76% over the previous year of RMB 39 million in the first half of 2016. The net profit growth rate fell short of revenue growth mainly due to a sharp increase in minority shareholders' equity; in the first half of the year, the company achieved contracted sales of 315 million yuan, with a positive contract sales surface of 10,150 square meters.

Funding channels have been broadened, and financing costs have been further reduced. The company effectively reduced comprehensive financing costs through various financing methods. The company's comprehensive financing cost in the first half of 2017 was 8.13%, down 0.41 percentage points from the 8.54% cost of corporate loans in 2016. As of June 30, 2017, the company had obtained a total of 5,559 million yuan in credit from financial institutions and used a total of 2,918 billion yuan of credit lines.

Cooperative development and land acquisition combine to reduce expert costs and improve development capabilities. On January 19, '17, a consortium formed by Beijing Investment Land, Shoukai Co., Ltd., Poly Beijing, Longhu Tianxing, and Dejun Real Estate, a wholly-owned subsidiary of the company, obtained the right to use the MC01-0003-6009, 6008, 0057, 0086, 0120, 6016, and 6015 plots in Tanjesi Town, Mentougou, Beijing, at a price of 6.33 billion yuan. Relying on the first-level development function of the major Tokyo Investment Group, the company has achieved first-level and second-level linkages to a certain extent. Its ability to acquire land is stronger than that of other housing enterprises. At the same time, through cooperative development and land acquisition models, the three effects of reducing risk, reducing costs, and improving capacity go hand in hand.

The majority shareholders' increased control and enhanced resources are expected to be further skewed based on judgment on the company's current value and confidence in future development, and supporting the healthy development of listed companies. The controlling shareholder of the company, Beijing Infrastructure Investment Co., Ltd. (hereinafter “Beijing Investment Company”), increased its A-share holdings of the company by 7407796 shares from December 23, 2016 to February 15, 2017, accounting for 1% of the company's total shares. After this increase in holdings, Beijing Investment Corporation held 251864314 A-shares of the company, accounting for 34% of the company's total shares.

Beijing Investment Group is a company wholly owned by the Beijing Municipal State-owned Assets Administration Commission. It is the investment and operator of urban rail transit construction in Beijing. It undertakes functions such as investment and financing, early planning, asset management, capital operation and related resource development and management for infrastructure projects such as Beijing rail transit, and has a monopoly position in the urban rail transit industry in Beijing. As the only A-share listing platform for the holding company Tokyo Investment Group, the company is expected to be further skewed in the group's resources in the future. The second largest shareholder of the company holds 20.78% of the shares and has withdrawn from the company's management to become a financial investor.

Conclusions:

As the only A-share listing platform for the holding company Tokyo Investment Group, the company is expected to receive further group resource preferences in the future and fully enjoy the rail construction development opportunities brought about by the rapid development of rail transit in Beijing and surrounding regions. The company uses cooperative land acquisition to reduce land acquisition risks and enhance development capabilities, reduces financing costs through multi-channel financing, ensures operational stability in parallel through two development models of “track building+ordinary housing”, and enhances the company's long-term development capabilities through multiple measures. We expect the company's revenue from 2017 to 2019 to be 7.1 billion yuan, 8.1 billion yuan, and 8.9 billion yuan respectively. Earnings per share are 0.54 yuan, 0.6 yuan and 0.7 yuan respectively. The corresponding PE is 40, 36.26 and 30.86 respectively, maintaining the “highly recommended” rating.

Risk warning: sales fall short of expectations, regulatory policies are becoming stricter, macroeconomics continues to search the bottom