The company released its mid-2017 report.

Revenue fell 0.12% in the first half of 2017, and net profit deducted from non-return fell by 48.55%. The performance was lower than expected. In the first half of 2017, the company achieved operating income of 493 million yuan, down 0.12% from the same period last year; net profit from shareholders of listed companies was 35.11 million yuan, down 40.45% from the same period last year; and net profit from non-return was 18.98 million yuan, down 48.55% from the same period last year. The performance was lower than we expected, and the decline exceeded our forecast 10pct. The large decline in performance in the first half of the year is mainly due to the fact that the Xizi international commercial real estate project developed by Hangzhou Baida Real Estate, an important associate with a 30% stake in Hangzhou, was put into operation in the second half of 2016, as the commercial operation of the project is still in the cultivation period. Operating income can not cover depreciation and interest expenses, resulting in large losses. The company confirmed the investment loss of 28.24 million yuan for the top 100 real estate in Hangzhou, which had a great impact on the current net profit.

In the first half of the year, the comprehensive gross profit margin increased by 0.18pct, the premium rate decreased by 1.87%, and the level of operation and management improved steadily. In the first half of 2017, while both revenue and net profit declined, the company's gross profit margin rose 0.18% year-on-year, including 0.64% year-on-year increase in the second quarter; sales expenses rose 0.21% year-on-year; management expenses decreased 0.13% year-on-year; financial expenses decreased 69.76% year-on-year. During the period, the cost was effectively controlled, down 1.87% from the same period last year. The increase in gross profit margin is mainly due to the company's effective control of procurement costs. In addition, the year-on-year increase in sales expenses is mainly due to the company's increased investment in advertising in the first half of the year; the slight decline in management expenses is mainly due to the reporting of managers' salaries; the sharp decline in financial expenses is mainly due to a sharp increase in interest on bank deposits in the current period compared with the same period last year.

Take a stake in Hangzhou Industrial and Commercial Trust, extend the layout, and improve the utilization rate of funds. The company intends to transfer 306 million yuan to Xin'an shares held by Hangzhou Industrial and Commercial Trust, a total of 93.9375 million shares. Upon completion of the transfer, the company will become the third largest shareholder of Hangzhou Industrial and Commercial Trust Co., Ltd., accounting for 6.2625% of the shares. Although Hangzhou Industrial and Commercial Trust is relatively small in the industry, with trust assets of only 33.729 billion yuan at the end of 2016, ranking almost at the bottom, it has strong profitability, with revenue of 324 million yuan and net profit of 202 million yuan in the first half of 2017. The hundred big groups actively expand the extension layout and choose the small and sophisticated Hangzhou industrial and commercial trust as the investment target, which can make full use of the company's idle funds and further improve the efficiency and income of capital utilization.

Maintain earnings forecasts and maintain "neutral" ratings. The company's main business is still under pressure, and the epitaxial layout has yet to release results. We expect revenue of 11.18 and 0.26 billion for 17-19, respectively, and 0.10 for EPS, 0.16 and 0.23 for PE, respectively, and the corresponding PE is 105-66-46. Maintain earnings forecasts and maintain "neutral" ratings.