The net profit of revenue returned to the mother increased significantly, and the operating net cash flow was under short-term pressure. In the first half of 2023, the company achieved a total revenue of 4.839 billion yuan, an increase of 56.07% over the same period last year, mainly due to the increase in the carry-over area of completed housing projects over the same period last year. In the first half of 2023, the company realized a net profit of 28 million yuan, an increase of 209.92% over the same period last year, mainly due to the substantial reduction in profits and losses of minority shareholders. The operating net cash flow of the company in the first half of 2023 was-561 million yuan, mainly due to the increase in land funds and taxes over the previous year and the change in income and expenditure with the joint venture project company. with the expansion of the company's financing channels, the short-term capital pressure may be resolved.

The scale of sales remained stable and the acquisition of land was not as good as planned at the beginning of the year. By the first half of 2023, the company had achieved a contract sales area of 3.33 million square meters, an increase of 6.39% over the same period last year, and the contract sales amount was 5.98 billion yuan, an increase of 2.15% over the same period last year. According to the 2022 annual report, the company plans to reserve about 450,000 square meters of land capacity by auction in 2023. As of the first half of 2023, the company's rights and interests have increased by 1224,000 square meters of real estate capacity building area, only 27% of the land expansion plan has been completed.

The asset-liability ratio remains stable and the debt structure needs to be adjusted. As of the first half of 2023, the company's asset-liability ratio was 87.64%, an increase of 0.41 percentage points compared with 87.28% at the end of 2022, and the cash interest guarantee ratio decreased to 0.41 from 4.55 at the end of 2022. In May 2023, SASAC approved the company's application for non-public issuance of A shares with a total amount of no more than 1.25 billion yuan to 35 specific investors, using project construction and repayment of financial institutions loans, after the implementation of the fixed increase, the company's debt structure may be optimized.

Investment suggestion: the parent company side: as the only state-owned real estate development company listed in Xi'an, the company has the advantage of deep ploughing in the western market with Xi'an as the center; the financing side: the company's fixed increase plan has been approved; the sales side: by 2023 H1, the company's sales amount and area have achieved positive year-on-year growth; investment side: the current land acquisition cost is relatively low. It is predicted that the operating income of the company will reach 11.243 billion yuan / 11.833 billion yuan / 12.518 billion yuan in 2023-2025, and the PE multiple in 2023-2025 will be 7-5-4. With the loose financing policy and gradual repair on the demand side, we believe that the company has a great advantage in terms of both development and expansion capabilities. Maintain the recommended rating.

Risk hint: rising debt ratio risk, Xi'an market downside risk.