The company turned losses into profits in the first half of the year, and the growth rate of housing construction and sales accelerated simultaneously: in the first half of 16 years, the company's operating income was 1.164 billion yuan, an increase of 360.77% over the same period last year and a net profit of 70.1037 million yuan, far better than the loss of 19.0586 million yuan in the same period last year. The performance improvement is due to the larger cash area and amount of development projects in the same period this year, which is better than that of last year, leading to a simultaneous improvement in performance. The amount of unreceived accounts in the first half of the year was 2.86 billion yuan, an increase of 25% over the beginning of the year. High advance receipts can basically guarantee profits in the next one to two years. Other accounts receivable of the company decreased by 79.3% compared with the same period last year, mainly because the company received a deposit for the opening and completion of the returned projects in the current period, so we speculate that the company has started and completed more projects in the past year, and the carry-over rate of the company is usually accelerated in the second half of the year, so the company's revenue is expected to increase significantly by the end of 16 years.

However, the company's sales gross profit margin is 19.17%, down from 25.56% at the end of last year and 31.69% in the same period last year. The rapid decline in gross margin may be due to the fact that low-margin projects sold in 14 and 15 years of industry decline are carried forward this year and are expected to improve in the future.

In-depth development of Hefei and its surrounding markets, layout of popular second-and third-tier cities ahead of time: all the company's real estate development projects are in Anhui Province, with emphasis on Hefei, while actively developing Feidong County, as the east gate of Hefei, and Bengbu, Xuancheng, Chaohu, Guangde and other places. This year, the company continued to make efforts in the land market. In April and June, the price of residential buildings was 10159.09 yuan per square meter and 9990.10 yuan per square meter, respectively. Feixi [2016] 6 and Yaohai District E1606, which are subway properties, were auctioned in April and June respectively. The core blocks in the east and southwest of Hefei have been successfully laid out. The total land area of the two cases is 303.49 mu (about 202300 square meters), which is about half of the total land area to be developed without the company for 15 years, and the total land amount is about 4.734 billion. Due to the hot property market in Hefei in 2016, leading real estate enterprises such as Evergrande and Poly have begun to enter the Hefei land market. As the local leading real estate enterprises in Anhui Province, the company has certain advantages in taking land. In the context of a better real estate industry, the homeopathic increase of land reserves in Hefei is an important step in the increasingly fierce competition. At the same time, the company lays out in advance in the cities and counties around Hefei, and the land price is relatively low. It is expected that the spillover effect of Hefei house purchase policy and the expansion of the competition scope of real estate developers will benefit the development of the cities and counties around Hefei, and the company can also benefit from it.

The development of the real estate industry in Hefei has good prospects and is sustainable: interest rates in China fell to a low level in the first half of 2016, M2 grew faster than the same period last year, and the logic of asset shortage led to a rise in house prices in first-tier cities. After the purchase restrictions in first-tier cities, the spillover effect, the low inventory itself and the concentrated release of rigid demand lead to a sharp rise in house prices in second-tier cities such as Hefei and Nanjing. Although local governments subsequently issued policies to curb housing prices, but in the case of frequent land kings, the current policy appears to be a little pale. The overall performance of real estate in Anhui Province was eye-catching in the first half of this year. Since the second quarter, the investment in real estate development has continued to exceed 10% compared with the same period last year, the area of commercial housing for sale has decreased for four consecutive months, and the prices of newly built housing have continued to rise compared with the same period last year. Hefei prices reached 33.8% in July compared with the same period last year. Hefei as a second-tier city with great development potential, the land market has also become a competitive place for many real estate enterprises. The total transaction value of Hefei land market in the first half of 2016 increased by 322.8% over the same period in 2015. Among them, 12 cases of Hefei total price land king, urban land king and county and district land king were born, and the land price increased by 322.87% compared with the first half of 2015. We believe that the fundamental reason for real estate developers to compete in Hefei is to see the development potential of Hefei as a provincial capital city and the investment and price space implied by the long-term shortage of its commercial housing inventory. The stock-to-sales ratio of new commercial housing in Hefei in August is about 2, which means that the stock of newly built commercial housing can only meet two months of sales, which belongs to a very low level in the country.

Hefei is expected to have more than 60, 000 homes on the market in the second half of 2016, but it is still lower than the 75000 and 82000 units in the same period in 15 years. The new house purchase policy in Hefei in July reduced the turnover of houses by 45.6% from the previous month, but due to the low inventory level and the predictable further tightening of home purchase policies in first-tier cities in the future, the volume and price levels of housing in second-tier cities such as Hefei are still supported.

Xingtai Holdings' only holding listed company has obvious resource advantages: due to early rumors that Ant Financial Services Group plans to list in A shares, including Ant Financial Services Group's concept stocks such as Hefei Urban Construction soared collectively. Xingtai Holdings, the controlling shareholder of Hefei Urban Construction, currently holds a 27.5% stake in Jianxin Trust. Xingtai Holdings is a large wholly state-owned company in Hefei and the financial holding platform of Hefei. Its financial assets account for more than 92% of the total assets. The 16-and-a-half annual report shows that Xingtai Holdings has total assets of 31.1 billion yuan and net assets of 10.5 billion yuan, while Hefei Urban Construction is the only listing platform under Xingtai Holdings, and its net assets account for about 15% of Xingtai Holdings. In the future, it is expected to carry out financial transformation with the help of the financial control platform, and play an important role in the reform of state-owned enterprises in Hefei.

Investment suggestion: the company's operating income is expected to be 25.64 yuan and 3.205 billion yuan respectively in 2016 / 2017, and the corresponding net profit is 1.81 yuan and 233 million yuan respectively, an increase of 98% and 28% respectively over the same period last year. The corresponding EPS in 2016 / 2017 is 0.57 yuan and 0.73 yuan respectively, and the current share price corresponds to 2016/2017PE of 36 yuan and 28X respectively. As the leader of the reform of state-owned enterprises in Hefei, the company has many factors to promote its development. It is optimistic about the development prospect and proposes to increase its holdings-B, with a target price of 22.41 yuan in 6 months.

Risk Tips:

1. Systemic risks in the financial and real estate industries.

2. The real estate policy has been significantly tightened to restrain the demand for home purchase, and the competition among brand real estate enterprises has intensified.

3. Due to the early Ant Financial Services Group concept speculation, the company's stock price fluctuates greatly, so pay attention to the investment risk in the short term.