Incident Company released its 2020 interim results report. In the first half of 2020, the company achieved a turnover of 28.24 billion yuan, +19% year-on-year; gross profit of 8.28 billion yuan, +18% year-on-year; and core net profit of 2.83 billion yuan, +14% year-on-year. In the first seven months of 2020, contract sales were approximately RMB 60.42 billion, achieving 46% of the annual target. Key investment points Performance is growing steadily, and profitability is stable. In 2020, H1 achieved a turnover of 28.24 billion yuan, +19% over the same period last year, a slowdown compared to the 73% performance growth rate in the same period last year. At the same time, the company has sold about 180 billion yuan of unsettled resources, and is expected to contribute about 450 yuan in revenue in the second half of the year. The annual revenue growth rate may be close to 50%. In 2020, H1 achieved gross profit of 8.28 billion yuan, +18% year on year; net profit of 2.84 billion yuan, +1% year on year; core net profit of 2.83 billion yuan, +14% year on year; core net profit of 2.45 billion yuan, +21% year on year. The corresponding gross margin, net interest rate, core net interest rate, and parent core net interest rate were 29.3%/10.1%/10.0%/8.7%, respectively, compared to -0.5PCT/- 1.7PCT/- 0.5PCT/+0.1 PCT in the same period last year. The profit growth rate is less than the revenue growth rate, mainly due to the increase in personnel and management expenses due to the expansion of the company's scale: current sales/distribution/administrative expenses were +20.1%/+17.1%/+26.5% year-on-year respectively. The cumulative sales volume for January-July was corrected year-on-year, and the sales target could be achieved with a 48% removal rate in the second half of the year. In July 2020, the company achieved sales volume of 9.55 billion yuan, +43% year-on-year, -46%; achieved sales area of 921,000 square meters, +38% year-on-year, -50%; and average sales price of 10,377 yuan/square meter, +10% month-on-month. In the first seven months of 2020, sales reached 60.42 billion yuan, +0.2% year-on-year, the first correction in the year; the sales area was 6.032 million square meters, +0.7% year-on-year. At present, the company has achieved 46% of the annual sales target of 132.2 billion yuan (corresponding to a 12% growth rate). Combined with the saleable value of 170 billion yuan in the second half of the year, the sales target can be achieved with a removal rate of about 48%. Give full play to the advantages of diversified land acquisition. As of 2020 H1, the total land storage area of the company reached 48.74 million square meters, with an equity ratio of 78% (year-on-year - 3PCT), corresponding value of 501.5 billion yuan, and about 116.2 billion yuan after including urban renewal projects, which can meet the company's development over the next four to five years. In 2020, the company's land investment amount was about 35-40 billion yuan. In the first half of the year, the company added 44 new projects and added 6.95 million square meters of construction (63% of mergers and acquisitions, 30% of tenders), with an additional value of over 83.2 billion yuan; the average cost of new projects was 3,812 yuan/square meter. At the same time, the land acquisition equity ratio declined slightly by 2PCT to 76%, mainly due to the increase in the company's bid for land acquisition by nearly 13 PCT compared to 2019, and the increase in cooperative development projects brought about by this. Looking at land acquisition regions, the Midwest (32%) and South China (28%) increased their share of land investment; Tier 1 and 2 international cities accounted for 60%. Promote urban renewal projects. The company has now achieved full coverage of the “three old” renovations and has more than 50 urban renewal projects at various stages. It is estimated that it will contribute an additional 658.7 billion yuan in saleable resources, of which the Guangdong-Hong Kong-Macao Greater Bay Area accounts for 95%, helping to increase land reserves in the Greater Bay Area. In July 2020, the company signed a cooperation agreement with Huayanian. The two sides will cooperate on urban renewal projects in the Greater Bay Area. By the end of 2019, the total annual land reserves of the flower sample reached 36.87 million square meters, about 53% of which were located in the Guangdong-Hong Kong-Macao Greater Bay Area; there were 46 urban renewal projects, 27 of which were located in Shenzhen. The cost of new financing is at a record low, and the financial indicators are stable. In 2016-2019, the company received three major international rating agencies, Fitch (BB-), S&P (B+) and Moody's (B1), and Moody's (B1), to upgrade its corporate credit rating and outlook. Currently, it is unanimously giving a “positive” rating outlook. The increase in principal ratings has further highlighted the company's financing advantages. In July, the company completed the issuance of US$4.6 billion four-year 6.35% of senior notes, down nearly 1.3 PCT from the same period in 2019. The company's net debt ratio for the first half of 2020 was 79.8%, up 4.9PCT from the previous value, and is at a reasonable level in the industry. At the same time, the company's total loans are about 103.05 billion yuan and short-term loans of 475.1 billion yuan (46%), of which about 18.05 billion yuan will expire in the second half of this year. Considering that the company has about 69.4 billion yuan in cash on hand (1.5X short-term cash debt ratio), we believe that the company's short-term debt repayment safety is high. In the first half of this year, the company's contract sales cash repayment rate was about 90%, up 15PCT from the same period last year, further safeguarding the health of the company's cash flow. Investment advice: In the first 7 months of 2020, the company's sales have returned to the same period last year, and the target completion rate is close to 46%. Abundant unsold resources and rich urban renewal projects provide a good guarantee for the company's future performance. The company's diversified land acquisition advantages are stable, and financing costs have continued to improve. Recently, management has continued to increase the company's shares. We are optimistic about the company's scale and performance growth after the nationalization of the company. We expect the 2020/2021 EPS to be 2.25/3.25 yuan, corresponding to PE 4.3/2.9. Maintain the “Highly Recommended” rating with a target price of HK$14.50. Risk warning: The impact of the COVID-19 pandemic has exceeded expectations, industry sales have declined more than expected, and policy regulation has fallen short of expectations.