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On the evening of August 23, Beichen Industry released its 2018 semi-annual report, which announced that its operating income was 5.47 billion yuan, down 30.3% from the same period last year; the net profit attributed to shareholders of listed companies was 640 million yuan, up 2.4% from the same period last year; and basic earnings per share was 0.19 yuan, up 2.4% from the same period last year.

Comments:

In the first half of the year, the results were + 2% compared with the same period last year, and the settlement was less in the first half of the year, but the gross profit and net profit significantly increased 18H1's operating income of 5.47 billion yuan,-30.3% year-on-year; net profit of 640 million yuan, + 2.4% year-on-year; earnings per share of 0.19 yuan, + 2.4% year on year; revenue decline was due to the impact of the settlement cycle of real estate projects, and the settlement area decreased in the first half of the year. Gross margin and net profit margin were 39.3% and 11.7% respectively, compared with + 10.3pct and + 3.8pct, respectively, resulting from the increase in gross profit margin of settlement projects. The total expense rate of the three items is 14.2%, year-on-year + 4.5pct, in which the sales expense rate and management expense rate are 4.0% and 5.9% respectively, which are + 1.5pct and + 1.8pct respectively, which is due to the expansion of the company's operation scale, the corresponding increase in expenses, and the decline in revenue in the first half of the year due to the impact of the carry-over cycle. The company's return on equity is 4.9%, year-on-year-0.3pct. As of the end of 18H1, the company's accounts received in advance reached 28.41 billion yuan, + 40.3% compared with the same period last year, which can cover 225.7% of settlement income in 17 years, and has more settable resources to fully ensure the release of performance in the next two years.

In the first half of the year, the sales were + 59% compared with the same period last year, and the payback rate was as high as 96%. The holding and operating properties grew steadily. 18H1 achieved a contracted sales amount of 14.75 billion yuan, + 58.5% compared with the same period last year; the contracted area was 8.7 million square meters, with an average sales price of 16954 yuan per square meter, which was-8.8% compared with the same period last year; the company accelerated turnover and payback, with a recovery rate of 95.7%. In the first half of the year, some key cities performed prominently, among which the Changsha Beichen Delta project, with its scarce location advantage, realized sales of 2.47 billion yuan; Chongqing Yuelai No.1 project, Wuhan Ulan City project and Hangzhou Guosongfu project contributed 990 million yuan, 890 million yuan and 710 million yuan respectively. In the second half of the year, the company aims to sell an area of 675,000 square meters, with a target sales amount of 9.25 billion yuan. The properties held and operated by the company include exhibitions, hotels, offices, apartments and other industries, covering an area of about 12.7 million square meters, of which 1.2 million square meters are located in the core area of the Asian Olympic Games in Beijing, with stable rental income and 1.27 billion yuan in investment property and hotel business income in the first half of the year. + 3.2% year-on-year.

The land reserve is rich, new construction and completion are accelerated at the same time, and settlement in the second half of the year is expected to accelerate the land reserve. The company's total land reserve is 845.1 million square meters, and the equity land reserve is 719.1 million square meters, which can cover 6.8,5.8 times of the 17-year sales area respectively. It is expected to meet the development needs of the company in the next 5 years or so, and the land reserve will be increased by 259,000 square meters in the first half of the year. In the first half of the year, the company realized 140.7 million square meters of new construction area, + 60.3 percent of the same period last year, 674.2 million square meters of resumed construction area, + 56.4 percent of the same period last year, and 672,000 square meters of completed area, + 38.4 percent of the same period last year. The company has steadily promoted regional expansion in recent years. By the end of 18H1, the company has entered 14 cities, including Beijing, Changsha, Wuhan, Hangzhou, Chengdu, Nanjing, Suzhou, Hefei, Langfang, Chongqing, Ningbo, Wuxi, Haikou and Meishan. In the first half of the year, the settlement amount of the company was 4.2 billion yuan,-35.4% compared with the same period last year, and the settlement area was 264,000 square meters, which was-47.2% compared with the same period last year, mainly affected by the settlement cycle. The company's new construction and completion are accelerated at the same time, and taking into account the company's high sales growth and more settlement resources, settlement is expected to accelerate in the second half of the year.

Investment advice: stable performance, beautiful sales, improved profit margins, maintain the "strong push" rating Beichen Industry, as an enterprise directly under the Beijing State-owned assets Supervision and Administration Commission, has front-end sales of national expansion and back-end holding property blessing, the formation of real estate development + investment property + exhibition management of the three major businesses. In the past 14 years, the company has resumed national expansion, the rapid increase in sales has greatly increased the advance collection, and the payback rate has remained high; the land reserve is rich, and the acceleration of new construction and completion is expected to accelerate settlement. We maintain the company's 2018-20 earnings per share forecast of 0.44,0.55 and 0.60 yuan, the current share price corresponds to the 18-20 year PE is 8.3 PE 6.7 times 6.1 times, taking into account the overall market valuation decline, lowered the target price to 5.00 yuan, maintaining the "strong push" rating.

Risk hint: the sales volume of the real estate market is higher than expected and the industry funds are tightened more than expected.