Incident: The company recently released its 2017 semi-annual report. During the reporting period, the company achieved operating income of 3.828 billion yuan, a year-on-year decrease of 3.36%, and realized net profit attributable to shareholders of listed companies of 301 million yuan, an increase of 23.41% over the previous year. The basic earnings per share was 0.128 yuan/share, a year-on-year decrease of 4.48%. The company has resumed work with an area of 1,328 million square meters, a year-on-year decrease of 19%. Of these, 139,000 square meters of new construction were started, and 627,000 square meters were completed. The completed sales contract amount was 4.29 billion yuan, an increase of 20% over the previous year. The completed sales contract area was 385,000 square meters, an increase of 57.2% over the previous year. Opinion: Operating income is basically flat, and net profit is rising steadily. During the reporting period, the company achieved operating income of 3.828 billion yuan, a year-on-year decrease of 3.36%, and realized net profit attributable to shareholders of listed companies of 301 million yuan, an increase of 23.41% over the previous year. The basic earnings per share was 0.128 yuan/share, a year-on-year decrease of 4.48%. The company's development projects in various cities progressed smoothly during the reporting period. Completed, under construction, and proposed projects were progressing according to plan. As a result, operating income declined slightly but remained flat. The reason for the steady increase in net profit was that there was a large settlement area for guaranteed housing last year, and the gross profit level of settlement projects increased significantly this year. Sales performance has been rising steadily, and business distribution is concentrated. During the reporting period, the company completed sales contracts of 4.29 billion yuan, an increase of 20% over the previous year; completed sales contract area of 385,000 square meters, an increase of 57.2% over the previous year. Good sales performance has laid the foundation for the company's revenue growth over the next 2-3 years. The company's sales contract area is concentrated, mainly in the four major cities of Beijing, Tianjin, Xi'an and Changsha. Of the four major cities, Xi'an accounts for nearly 80% of the sales area, which is an important contributor to sales in the first half of the year, reflecting the effectiveness of the company's diversified urban layout. The company's Dayi Mountain Villa project in Guangzhou will open for sale in the second half of this year. At that time, the company's sales revenue will increase revenue from Guangzhou for the first time. Land acquisition was careful, and the layout of the four major regions took shape. During the reporting period, the company added 151,500 square meters of planned construction area for projects acquired but not yet started. By the end of the reporting period, the planned construction area of the projects that the company had obtained but had not yet started was 878,600 square meters. The company has been cautious about land acquisition in the past few years. Overall, it is still digesting the original reserve area, but thanks to this round of market conditions, a large part of the land storage in Changsha and Xi'an has been removed from inventory. In order to guarantee the sustainability of the company's future sales, it is expected that the company will step up its land acquisition efforts in the second half of this year. It is worth mentioning that at the end of 2016, the company purchased the Guangzhou Dayi Mountain Villa project through an equity acquisition and successfully entered South China. In addition to the already laid out regions of central China, east China, and western China, the company's four major regional layout was formed. Currently, the company's land reserves are mainly distributed in the major cities of Beijing, Tianjin, Xi'an, Changsha and Guangzhou in these four major regions, directly reflecting the company's urban strategic layout with Beijing as the core, radiating the “four major regions and five major cities” of the Beijing-Tianjin-Hebei, Pearl River Delta, and Midwest China. It is worth noting that the company uses the merger and acquisition method as another important channel to obtain land reserves. Thanks to the talent and resource advantages of the company's merger and acquisition management team, the company's land storage is expected to expand rapidly in the short term. Implement a diversification strategy and transform into an urban service provider in the future. In the future, the company will further implement the “1+N” strategy. It will rely on the advantages of traditional housing business, develop innovative upstream and downstream businesses such as education, medical care, finance, etc., explore users' needs at a deeper level, and strive to transform from a traditional real estate developer to a comprehensive service provider. In the commercial real estate sector, the company will increase the proportion of commercial assets and own more commercial projects. On June 12, the company signed a strategic cooperation agreement with Joy City Real Estate to cooperate in the development of the Huayuan Shijingshan complex project. This cooperation marks a brand-new stage for Huayuan Business. On August 18, Grand Hyatt Hotel, Changsha, a hotel asset owned by the company and managed by the Hyatt Hotels Group, began operation. This is the first international brand hotel owned by the company. Its opening and operation means deepening the company's diversified strategic layout. The company has good credit and is able to finance its development. Good corporate reputation guarantees that the company can continuously and stably finance from multiple channels such as banks, trusts, funds, securities markets, etc., providing a strong financial guarantee for the good operation and development of the company. At the end of last year, the company carried out asset securitization based on the rental property held in Block D of Yingdu Tower, and finally completed the issuance of relevant asset-backed special securities in January 2017, with a total issuance scale of 736 million yuan. This is the first single REITs product issued domestically by an enterprise under the Beijing Municipal Assets Administration Commission. It is also the first single REITs product issued within the China Securities Interagency Quotation System, fully demonstrating the company's capital operation capacity and kicking off the company's asset-light operating model. The incentive mechanism is flexible. As the first and only state-owned enterprise in Beijing to implement equity incentives for executives, the company greatly reflects the Xicheng District State-owned Assets Administration Commission's strong support for the company's operation and management, as well as the flexibility of the company's market-based operations. We believe that the company relies on the support of the Xicheng District State-owned Assets Administration Commission and is expected to benefit from the implementation of events such as shed reform, state-owned enterprise reform, and the “Central Special Administrative Region” in the future. Risk warning: policy risk, project development risk, sales risk, financial risk Conclusion: Since its establishment in 1992, Huayuan has stood firm for more than 20 years, experienced all major and large cycles of China's real estate industry, and has used facts to prove to the industry the company's good corporate governance structure and strong business operation capabilities. We are optimistic about the company's high profitability over the years, and we are optimistic about the strength hidden behind the company's new actions. We expect the company's revenue from 2017 to 2019 to be 9.5 billion yuan, 11.7 billion yuan and 141 billion yuan respectively; earnings per share will be 0.47 yuan, 0.61 yuan and 0.78 yuan, respectively, corresponding PE of 10.17, 7.81 and 6.12, respectively. Maintain the company's “Highly Recommended” rating.