Core Opinions The company released its semi-annual report. In the first half of 2018, it achieved revenue of 6.436 billion yuan, an increase of 8.38% over the previous year; realized net profit of 834 million yuan, an increase of 220.71% over the previous year; realized net profit of 834 million yuan, a year-on-year increase of 820 million yuan, an increase of 168.59%; and the weighted average ROE increased 4.85 pct to 7.77% from 2017 H1. The company's overall performance is in line with our expectations, maintaining the 2018-2020 EPS profit forecast of 0.83, 0.92, and 1.05 yuan, and maintaining the “buy” rating. Selling commercial assets, the net profit of the mother increased high in the first half of the year. The company achieved a high increase in net profit in the first half of the year, mainly because it sold some high-margin commercial assets in the first quarter. According to the “**** Real Estate Group Co., Ltd. 2018 First Interim Note Collection Guide”, the company sold commercial real estate at No. 58-88 Lishui Road in Shanghai through an agreement transfer in the first quarter, and it is estimated that it will earn at least 900 million dollars in revenue, with a gross margin of more than 80%. At the end of the first half of the year, the company's advance accounts reached 12.134 billion yuan, an increase of 45.46% over the end of 2017. Development business accelerated turnover, and land acquisition continued for high-intensity companies with sales volume of 13.595 billion yuan in the first half of the year, an increase of 28.73% over the previous year; 1,887 million square meters of new construction was started, an increase of 204.24% over the previous year. We believe that the company's accelerated commencement of new construction is to guarantee sales volume throughout the year and accelerate removal and repayment. The annual sales amount is expected to exceed 25 billion yuan. In order to supplement saleable resources, the company continued its land acquisition intensity since the second half of 2017, adding 760,900 square meters of real estate reserves in the first half of the year, a year-on-year increase of 1187.48%. The company won the Shanghai Guaranteed Housing and Urban Village Renovation Projects through tenders in January and July 2018 respectively. It is expected that in the future, it will continue to use the Group's advantages to seek new business opportunities in the Shanghai Guaranteed Housing and Urban Village Renovation Project, the development of 2,000 acres of land in Chongming Island, and the connection between land and storage resources of sister companies within the Group. Both absolute valuation and relative valuation are attractive in terms of absolute valuation. According to our first coverage report, the company's RNAV is 8.40 yuan, and the stock price is discounted 50.83% compared to RNAV. In terms of relative valuation: From a vertical perspective, the company's current PE (TTM) is only 3.81 times, the lowest level since the restructuring and listing in September 2015. Looking horizontally, among small and medium-sized real estate development companies, we selected Huafa shares, Shanghai Development, Beijing Urban Construction, and Huayuan Real Estate, which has a background in the local State Assets Administration Commission and focuses on development business, as comparable companies. The average PE in 2018 was 7.65 times, and the average PEG was 0.83 (wind unanimously expected). However, according to our estimates, the company's PE in 2018 was only 4.99 times, and PEG was 0.39, which is somewhat underestimated. The steady growth of development business+valuation has the advantage of maintaining a “buy” rating company's development business to achieve steady sales growth by speeding up turnover and maintaining high intensity in land acquisition; both absolute valuation and relative valuation are attractive. We maintain our profit forecasts for 2018-2020 EPS of 0.83, 0.92, and 1.05 yuan. Referring to the PE valuation of comparable companies 7.65 times in 2018, considering that the company's net profit in 2018 is expected to decline slightly year-on-year, and that the growth rate of large-scale net profit in 2018-2020 is expected to be slightly lower than that of comparable companies, we gave the company a certain discount, maintained the company's reasonable valuation level of 6.5-7 times, and maintained the target price of 5.40-5.81 yuan and the “buy” rating. Risk warning: The saleable value is relatively low; real estate sales may be adversely affected by regulatory policies and tightening of shed reform loans.