Performance summary: Recently, the company released its 2019 annual report. During the reporting period, it achieved revenue of 32.56 billion yuan, an increase of 23.1% over the previous year, and achieved a core net profit of 2.31 billion yuan to the mother, an increase of 20.4% over the previous year. Steady performance growth and improved profitability: In 2019, the company's revenue and performance grew steadily, achieving net profit of 3.09 billion yuan for the whole year, up 38.6% year on year, net profit margin increased to 9.5%, core net profit increased to 2.9 billion yuan, up 42.7% year on year, and core profit margin rose to 8.9%. During the reporting period, the company's overall gross margin was 20.0%, down 2.8 percentage points from the previous year, mainly due to centralized settlement of a number of low gross margin projects (especially in Haixi and Midwest). After deducting its influence, the gross margin was about 22%, which is not much different from 2018. The target sales growth rate is slowing down, and the value structure is superior: the company achieved contract sales of 13.7 billion yuan in 2019, an increase of 21.0% year on year, and the unit sales price was 15,488 yuan per square meter, down 7.6% year on year. In terms of regional contributions, the Yangtze River Delta, West Coast, Central China, and Bohai Rim accounted for 55.2%, 24.2%, 9.6%, and 7.2% of sales, respectively; in terms of urban energy levels, first-tier, second-tier, and third-tier cities accounted for 4.0%, 78.4%, and 17.6%, respectively. In 2020, the company expects to sell a total of 240 billion dollars. At a 60% removal rate, it can achieve the sales target of 140 billion dollars (corresponding to a 7% increase). Considering the company's value structure, there is a high probability that it will exceed the target. Land acquisition focused on the second tier, and financing costs declined: in 2019, the company implemented a strategy of deep regional cultivation and a strong second tier, adding 5.6 million square meters of land storage, and the equity ratio increased dramatically to 73% (only 33% in 2018), accounting for 85% of the second tier. At the end of the reporting period, the company's total land storage was 26.15 million square meters (average land price 4,647 yuan per square meter), with a total value of 450 billion yuan (equity ratio 55.3%), of which Tier 1 and 2 accounted for 74%. The company's capital structure continues to be optimized, and financing costs have declined somewhat. At the end of the reporting period, the company held 35.31 billion dollars in cash and equivalents, an increase of 24.5% over the previous year, and the short-term cash debt ratio increased sharply to 1.76; the net debt ratio at the end of the year was 75.2%, which continued to be at a healthy level. The company's weighted average borrowing cost in 2019 was 7.5%, down 0.3 percentage points from the previous year. In the future, as high-cost debt is replaced, financing costs may drop further. Profit forecast and rating: The company's EPS for 20/21/22 is estimated to be RMB 0.70/0.82/0.95, respectively, with a corresponding dynamic price-earnings ratio of 6.4/5.5/4.7 times. Considering the company's high share of land storage in the first and second tier, the credit rating has been raised many times, the land acquisition equity ratio is higher, and the financing cost is lower, we gave the company a PE valuation of 7 times in 2020. The target price remained unchanged at HK$5.39, maintaining the “hold” rating. Risk warning: Sales and repayments fall short of expectations, completion and delivery fall short of expectations, etc.