The 1H17 performance was in line with expectations. Shenzhen Holdings announced results for the first half of 2017: revenue of HK$5.45 billion; a decrease of 15% year over year; core net profit of HK$3.42 billion, up 482% year on year; and core net profit of HK$0.45 per share. An interim dividend of HK$0.07 per share, corresponding to a dividend yield of 2%. The sharp year-on-year increase in core net profit was mainly due to the HK$3.3 billion revenue from disposal of land storage in third- and fourth-tier cities. We acknowledge the company's active optimization of its soil storage structure. Gross margin increased to 40.3% in the first half of 2017 (38.7% in FY16), while gross margins for projects outside Shenzhen were 50.7% and 32.1%, respectively. Trends We expect FY17 contract sales to be between 12 billion and 14 billion yuan. We judge that in an environment where the overall real estate policy in Shenzhen is tightening, the company may postpone the sale of some Shenzhen properties until FY18 in order to protect gross margin. Contract sales for FY18 are expected to exceed 20 billion yuan. The net debt ratio for FY17 is expected to reach around 35% (25% in the first half of 2017), which will still strongly support the expansion of the company's land reserves. The profit forecast takes into account the asset disposal income of HK$3.3 billion for the first half of 2017, which has basically locked in profit expectations for the whole year. We raised our earnings per share forecasts for 2017 and 2018 by 17% and 12% from HK$0.38 and HK$0.48 to HK$0.44 and HK$0.54, respectively. Valuation and recommendations Currently, the company's stock price corresponds to 8.1 times /6.7 times the 2017/18 expected P/E and NAV discount of 57%. We maintain our recommended rating and target price of HK$4.50, which is 26.05% higher than the current stock price. Risky pre-sale and delivery progress fell short of expectations.