Business performance declined year-on-year, but gradually recovered and stabilized. The company's 2020Q1-3 operating income was 56.7 billion yuan, down 11.79% from the same period last year; operating profit was 12 billion yuan, down 16.24% from the same period last year; net profit was 8.05 billion yuan, down 18.59% from the same period last year; net profit was 7.28 billion yuan, down 25.3% from the same period last year; and earnings per share was 1.84 yuan, down 42.14% from the same period last year. Although there is a certain decline in the same period last year, the company's net profit belonging to listed shareholders in the third quarter narrowed to 3.8% from 28.5% in the same period last year, and the company's operation is gradually getting rid of the impact of the epidemic and stabilizing.

The gross profit margin increased compared with the same period last year, and the increase in the volume of interest-bearing liabilities led to an increase in financial expenses. In terms of profit margin, the company's 2020Q1-3 gross profit margin was 42.44%, an increase of 2.04% over the same period last year, and the net profit rate was 12.83%, down 2.32% from the same period last year. The company's three rates accounted for 14.44% of operating income, an increase of 4.26 percentage points over the same period in 2019, mainly due to the increase in financial expenses. The sales expenses and management expenses of 2020Q1-3 were 1 billion yuan and 3.5 billion yuan respectively, down 14.51% and 21.28% respectively from the same period last year, and the financial expenses were 3.678 billion yuan, an increase of 301% over the same period last year. We believe that the increase in corporate financial expenses is mainly due to the increase in the company's interest-bearing liabilities, as of 2019Q3's interest-bearing liabilities of 211.8 billion yuan, an increase of 19% over the same period last year.

The asset-liability ratio and the debt ratio excluding prepaid accounts declined compared with the same period last year. According to the company's three-quarter report, 2020Q3 had book cash of 38.6 billion yuan as of the end of 2019, down 9% from the end of 2019; total assets were 506.8 billion yuan, up 11.74% from the same period last year; and net assets were 55.3 billion yuan, up 14.3% from the same period last year. The company's asset-liability ratio was 82.06%, down 2.89% from the same period last year, interest-bearing debt ratio was 41.79%, up 1.81% from the same period last year; excluding accounts received in advance, the debt ratio was 76%, down 1.91% from the same period last year.

Actively replenish land, operating cash flow continues to improve. In the first three quarters of 2020, the company spent 19.85 billion yuan on land, an increase of nearly 2.5 billion yuan over the same period last year, and the planned capacity building area increased by 1.106 million square meters over the end of 2019. Under the circumstances that the company increased its investment in resource reserves, especially in commercial real estate and related businesses, and the amount of land payment increased by 2.5 billion yuan over the same period last year, the overall net operating cash flow of the company decreased by 14.5 billion yuan. The company's operating cash flow showed a steady improvement trend, among which, the company's industrial new town and related business cash flow situation has been greatly improved compared with the same period last year. The net outflow of operating cash flow decreased by 25.3 billion yuan.

Investment advice: "better than the big market". The company's performance in 2020 is greatly affected by the epidemic, and the growth rate of short-term performance may decline compared with the same period last year. According to the company's latest quarterly report, we have lowered our forecast for the company's annual net profit. We estimate that the company's EPS will be 2.87 yuan per share in 2020, which will give the company a valuation of 5-6 times PE in 2020. the corresponding market capitalization is about 562-67.4 billion yuan, and the corresponding reasonable value range is 14.35-17.22 yuan. Risk hint: affected by the epidemic, the company's sales, start-up, completion and carry-over performance may all be affected, and revenue and profit growth may be lower than expected.