Sunac China will release its results for the first half of 2019 on August 21.

In China, the real estate industry is either being hammered or on its way. This is determined by the nature of the product (the people's livelihood of the house), the business model (highly leveraged) and the volume of the industry (which accounts for too much of the real economy). No company can move forward independently from this big logic.

Since being hammered is inevitable, it is very important to choose which posture to deal with according to your own situation. Over the past few years, Sunac has been in a "wind-up" state of tension, while pursuing rapid growth through high leverage and high turnover.

It is true that this model is risky, but in retrospect, Sunac has become one of the top five housing companies in the country in just a few years, winning itself the scale advantage of the consolidation of the real estate development industry in the next few years and exploring the time advantage of long-term transformation.

This advantage has also been recognized by the market, further reflected in the stock price trend. Since the beginning of 2019, Rongchuang's share price has risen by 40.48%, far outperforming the market and most real estate companies. Negative factors such as tighter regulation of house prices and tighter financing did not deal too much a blow to financial creation.

Data can often provide clues for people, as long as you dig carefully. For the semi-annual report to be released by Sunac, on the one hand, we pay attention to whether some important data are in line with the previous judgment, on the other hand, we also look forward to finding new observation and tracking clues from the changes in the data. Specifically, they are the following two points:

I. accelerating the transformation of performance

According to the latest announcement, the contract sales of Sunac before July 2019 were 255.31 billion yuan, an increase of 13% over the same period last year. Given the low base in the second half of 2018, contract sales in 2019 will probably reach 20-30%, in line with management's expectations.

Contract sales of Sunac have grown rapidly in the past, with a compound annual growth rate of more than 65% from 2010 to 2018. However, as the scale gradually reached the industry-leading, Sunac's growth rate began to enter an adjustment period in 2018. According to management at the 2018 annual shareholders' meeting, the future Sunac's sales goal is to maintain 20-30% annual growth.

Based on the level of population growth and urbanization, the overall size of the industry will remain at the current level in the next 5-10 years. The 20-30% excess growth drive of Sunac comes from:

1. Existing land reserve

2. The key layout cities are all cities with population and economic expansion.

3. Under the advantage of scale, the expectation of swallowing up the market share of small and medium-sized enterprises.

However, the high growth of contract sales in the past few years has also gradually entered the harvest period. Since 2017, Sunac has accelerated the pace of settlement of sold properties, and the carry-over of revenue and profits has also accelerated significantly. According to the profit forecast of July 26, due to the increase in the delivery area of properties sold, the profit attributable to shareholders in the first half of 2019 increased by more than 45% year-on-year, and the core profit attributable to shareholders excluding non-recurring businesses such as mergers increased by more than 100% year-on-year.

II. Progress of the Culture and Tourism Project

In the short and medium term, the development business is still the top priority. But in the longer term, real estate companies are looking for more possibilities. And Wen Lu is the future of Fuchuang's choice.

At present, Rongchuang has 10 cultural travel cities, 4 tourist resorts, 9 cultural travel towns, 39 parks, 24 commercial projects, and supporting 70 star hotels.

At present, the proportion of revenue from the financial innovation project is still small, but it has made a profit. For the whole of 2018, Sunchuang achieved revenue of 2.03 billion yuan, an increase of 86.2 percent over the same period last year, accounting for 1.63 percent of the total revenue, and a net profit of 260 million yuan, an increase of 276.2 percent over the same period last year.

However, due to the large investment, slow return and high uncertainty of the literature and tourism project, the management's investment in the literature and tourism project is still relatively conservative. At the annual general meeting of shareholders in 2018, the management made it clear that in order to ensure the liquidity of the assets of the group as a whole, the investment of Wenliu was strictly controlled. The proportion of assets held does not exceed 20% of the total assets.

III. Analysts' expectations

According to Bloomberg statistics, analysts' comprehensive forecasts for the first half of Sunac are as follows: revenue is 74.05 billion yuan, up 60.0% from a year earlier, and adjusted net profit is 9.93 billion yuan, up 50.3% from a year earlier.

In terms of ratings, a total of 21 analysts gave rating comments, of which 20 analysts gave a "buy" rating and one analyst a "hold" rating. The corresponding 12-month comprehensive target price of 52.98 Hong Kong dollars, as of August 20 closing, the financing price of 34.50 Hong Kong dollars.

Let's look forward to tomorrow's semi-annual report.