1. Incident The company published its 2018 annual report. During the reporting period, the company achieved operating income of 19.286 billion yuan, up 47.45% year on year; the company achieved net profit attributable to shareholders of listed companies of 2,592 billion yuan, up 174.21% year on year; net profit attributable to shareholders of listed companies after deduction was 2,471 billion yuan, up 763.13% year on year; the company's basic earnings per share was 0.55 yuan, up 175% year on year, in line with expectations. The company's 2018 profit distribution plan is to distribute cash dividends of RMB 1.8 (tax included) for every 10 shares to all shareholders based on the total share capital up to the end of 2018, and transfer 2 shares to all shareholders for every 10 shares by transferring capital from the capital reserve fund to all shareholders by transferring capital to all shareholders. 2. Our analysis and judgment (1) The restructuring was completed in 2018, the scale of the enterprise was significantly expanded, and the company completed major asset restructuring during the reporting period. 100% of China Star Group's shares have been transferred to the company's name, solving the problem of competition in the industry. At the same time, strategic investors China Resources Land Holdings and Ping An Real Estate were introduced, and 1,994 billion yuan of supporting capital was raised. By the end of 2018, Shanghai Real Estate Group, China Resources Land Holdings, and Ping An Real Estate were the first, second, and sixth largest shareholders of the company, accounting for 68.44%, 6.76%, and 0.59% of the company's total share capital. The company's total assets increased from 27.9 billion yuan to 56.6 billion yuan, an increase of 102.87%, and net assets increased from 3.6 billion yuan to 13.74 billion yuan, an increase of 280%. The share capital increased from 1,867 million shares to 5.08 billion shares, an increase of 172%. (2) Accurate marketing, achieving effective breakthroughs in sales performance. In 2018, the company adopted classification measures to formulate targeted strategies for different cities and actively eliminate them. Local projects in Shanghai are accurately marketed. Offsite projects use a combination of sales methods using multiple strategies, and scattered businesses try to eliminate leases first, then sales, and leases. An effective breakthrough was achieved in sales performance under various measures. The cumulative contract area reached 335,700 square meters, an increase of 51.9% over the previous year; the contract amount was 13.841 billion yuan, an increase of 98.72% over the previous year. At the same time, the company further optimizes its asset structure and promotes the strategic transformation of high-quality real estate holdings. By the end of 2018, the company owned more than 600,000 square meters of various types of operating properties, and the rental income for the full year of 2018 was about 650 million yuan. (3) The entry of China Resources into management is expected to improve the company's operating efficiency. On July 2, 2018, Ling Xiaojie, the deputy general manager of China Resources Land Co., Ltd., and Wang Huihong, the deputy general manager of China Resources Land in East China, were appointed as the general manager and deputy general manager of China Resources Land, respectively. This indicates that China Resources Land will soon play an important role in the management level of Chinese enterprises. It is expected that China Resources Land will draw on China Resources Land's development experience and vigorously improve the operating efficiency of Chinese enterprises. (4) Ping An Real Estate is expected to help promote the real estate finance model. After Safe's shareholding, the company will use Ping An's financial real estate platform in the future to enhance the company's long-term financing capacity in the financial field. Strong financial strength helps to broaden financing channels. Ping An Real Estate is backed by Ping An Insurance and has strong financial strength: 20 billion yuan of own capital, 100 billion yuan of insurance funds, and third party funds from individual customers. Ping An Real Estate, a powerful long-term rental apartment developer and brand operator within the United Nations, uses a cooperative approach of “main asset-heavy holding+important investment in asset-light operations” to invest and manage long-term rental real estate assets. In the future, cooperation between Chinese enterprises and Ping An Real Estate will facilitate the expansion of the company's subsequent financing channels, use financial instruments to accelerate the process of enterprise asset-light transformation, fully tap the advantages of all parties to form complementary resources, and actively expand new cooperative business opportunities. (5) New Strategy, New Climate, New Journey The company's new strategy for 2019 is “deeply involved in the Shanghai region, focusing on the development and operation of the three product lines of residential, commercial, and stock assets.” In terms of resource acquisition, the company will adhere to a development concept based on Shanghai. At the same time, in terms of investment, it will carry out research and expansion around emerging new cities, emerging industrial areas, population import zones, and mature city centers, make every effort to expand cooperation opportunities with benchmark real estate companies in terms of development models, and actively participate in the acquisition of high-quality second-hand projects. In terms of commercial projects, the company will build a platform for an asset-light operating model, use a series of office projects as benchmarks, achieve value-added services such as shared offices, build a Chinese enterprise brand, and establish a commercial real estate professional team with efficient operation and control of commercial properties. (6) The balance ratio declined, and the company's principal credit rating was stable. The company's balance ratio fell from 76.71% in 2017 to 72.39% at the end of 2018. By the end of 2018, the company had received a total credit line of 12.6 billion yuan from banks, used credit lines of 8.4 billion yuan, and unused lines of 4.2 billion yuan. During the reporting period, China Chengxin Securities Assessment Co., Ltd. raised the credit rating of the “China Enterprise Co., Ltd. 2013 Corporate Bonds” bond to AAA, and the company's principal credit rating was maintained at AA, and the rating outlook was stable. 3. The investment recommendation is based on the company's development project reserves and consideration of sales conditions in the Shanghai real estate market. We expect the company's earnings per share in 2019-2020 to be 0.61 yuan and 0.65 yuan respectively. Based on the closing price of 6.29 yuan on March 5, the corresponding dynamic price-earnings ratio was 10.3 times and 9.7 times, respectively, and the net market ratio was 2.8 times. According to the company's current reserve program, our calculated RNAV is 7.78 yuan. The current price of A shares is 23% discounted compared to RNAV. Referring to comparable company valuation levels, the company's dynamic price-earnings ratio in 2019 was 10 times, lower than the average by 12.22 times. It is attractive and continues to maintain its “recommended” rating. 4. Risks indicate the risk of a sharp drop in housing prices, and the risk that shed reform falls short of expectations, etc.