As of June 2020, Aoyuan has a total land storage area of about 48.74 million square meters, with an estimated value of about 501.5 billion yuan. After deducting the unsold portion, the remaining saleable value is estimated at about 321.5 billion yuan. In the first half of the year, the company added a number of urban renewal projects to more than 50, with a total planned construction area of about 30.58 million square meters, and is expected to provide additional saleable resources of about 658.7 billion yuan. Authorized land storage, urban renewal project resources, and corporate mergers and acquisitions capabilities support Aoyuan to achieve sales targets of 200 billion yuan in 2022 and 250 billion yuan in 2023. The compound annual growth rate for 2020-23 is about 23.7%, which is higher than the average growth rate expected for medium-sized housing enterprises. Aoyuan's revenue for the first half of the year increased 19.3% year on year. We estimate that core net interest rate was about 7.2%, and core equity net profit rose 5.8% year on year to $2.03 billion. Based on performance data, we adjusted our net profit forecast for 2020-22 -7.3%/-1.2%/-5.7% to maintain the buying rating, with a target price of HK$18 per share. Report summary Gross margin remained stable at a high level. Revenue for the first half of 2020 increased 19.3% year over year to $28.2 billion. The gross margin was about 29.3%, a slight decrease of 0.4 percent from the previous year, mainly due to changes in the property delivery structure. The operating profit after deduction of marketing expenses was about 5.72 billion yuan, and the profit margin was about 20.2%, a slight decrease of 0.7 percentage points from the previous year. Core net profit increased 5.8% year over year to $2.03 billion. The net leverage ratio was about 79.8%, up 5 percentage points from the end of last year, up 14.1 percentage points from the previous year, and remained below 80%. The cumulative sales growth in July has been corrected. As of June 2020, the company has a total land storage area of about 48.74 million square meters and an estimated value of about 501.5 billion yuan. After deducting the portion that has not been sold (about 180 billion yuan), the remaining saleable value is estimated at about 321.5 billion yuan. Affected by the health incident, the company's sales in the first half of the year was about 50.87 billion yuan, down 5% from the previous year, and the removal rate was about 40%. The second half of the year will provide about 170 billion yuan of saleable resources. As long as the removal rate reaches 48% or more, the annual target of 132 billion yuan can be achieved, which is a high degree of completion. As of July, Aoyuan's cumulative sales were about 60.42 billion yuan, up 0.2% year on year. It has recovered from last year's level and achieved the annual target of about 45%. Urban renewal resources are gradually being released. As of June 2020, Aoyuan had over 50 urban renewal projects, a net increase of 20 over the end of last year. The total planned construction area of the urban renewal project is about 30.58 million square meters, and is expected to provide additional saleable resources of about 658.7 billion yuan, a net increase of 432.7 billion yuan over the end of last year. Most of them are located in the Greater Bay Area, accounting for about 95%. It is expected that in the second half of the year, 8 projects will be converted in the first phase or all of them, which will bring the company a value of 63.4 billion yuan. Benefiting from Aoyuan's strategic layout in the early years, the company's urban renewal projects increased significantly in the first half of the year. Of the new land reserves added in the first half of the year, about 7% came from urban renewal projects, which was higher than the previous average of 2%, and urban renewal resources were gradually released. Maintain the buy rating. Geographic risk dispersion under Aoyuan's strategy of nationwide layout, and the ability of on-hand urban renewal project resources to supplement the company's land storage with high-quality goods value, is a comparative advantage in the volatile environment of the real estate market. Authorized land storage and urban renewal resources, plus the company's merger and acquisition capabilities, support Aoyuan to achieve sales targets of 200 billion yuan in 2022 and 250 billion yuan in 2023. The compound annual growth rate for 2020-23 is about 23.7%, which is higher than the average growth rate expected for medium-sized housing enterprises. Based on performance data, we adjusted our net profit forecast for 2020-22 to -7.3%/-1.2%/-5.7% to maintain our buying rating. Risk warning: Real estate regulation policies and economic downturn are putting pressure on sales.