Incident: The company released its 24-year report. In the first half of 2024, the company achieved operating income of 51.27 billion yuan, a year-on-year decrease of 0.3%; net profit to mother was 1.42 billion yuan, a year-on-year decrease of 34.2%.

Comment: Core performance remains stable, land acquisition intensity needs to be improved, diversified businesses are developing steadily, and finances are stable.

The gross margin of development continued to decline, and the core performance remained stable: in H1 in '24, the company achieved revenue of 51.27 billion yuan, of which the development business achieved revenue of 39.9 billion yuan, a year-on-year decrease of 4.2%, accounting for 77.8% of revenue, and the carry-over schedule slowed in the first half of the year; revenue from asset operating business was 3.1 billion yuan, up 13.1% year on year; revenue from urban service business was 8.27 billion yuan, up 16.9% year on year, diversified business grew steadily; the company's comprehensive gross margin was 12.0%, down year on year 4.3 pct, of which the gross margin of the development business was 12.2%, down 5.6 pct year on year, continuing the downward trend, mainly affected by the carry-over structure, etc.; the company's net profit to mother was 1.42 billion yuan, down 34.2% year on year, mainly due to a decrease in gross margin of development business settlement and a year-on-year decrease in equity investment income from the transfer of subsidiaries. Among them, the company's net profit after deducting non-return mother was 1.4 billion yuan, an increase of 0.45% year on year, and core profitability remained stable.

The sales position of deeply cultivated cities is stable, and the intensity of land acquisition needs to be improved: in 24 H1, the company achieved a sales amount of 100.95 billion yuan, a year-on-year decrease of 39.3%, and the sales equity ratio is expected to increase performance by 9 pcts to 65% year on year. The sales performance of the core 10 cities contributed 66%, and entered the TOP5 in local traffic sales in 12 cities across the country. Among them, Shenzhen, Xi'an, Changsha, Hefei and Nantong ranked in the top 1 in the local area. The total results of the city focus and deep cultivation were remarkable. Billions of yuan. Among them, the investment amount in the “core 10 cities” reached 86%, and the overall land acquisition sales ratio was 14.5%, a year-on-year decrease of 11 pcts, which may be affected by factors such as sales market demand, reduced land supply in core cities, and fierce competition for core land storage.

Active transformation and upgrading, and diversified business revenue increased steadily: In terms of asset operations, the company's full-caliber asset operating income was 3.6 billion yuan, up 15% year on year, and EBITDA reached 1.9 billion yuan, up 14% year on year. Among them, commercial, industrial park and apartment operating revenue reached 0.84 billion yuan, 0.57 billion yuan, and 0.63 billion yuan respectively, up 25.3%, 12.8%, and 24.1% year on year; in terms of property services, the company's The investment balance achieved revenue of 7.84 billion yuan, an increase of 12.3% over the previous year. A new annual contract amount of 1.89 billion yuan was signed, and the expansion capacity is strong.

Financial stability and continuous reduction in financing costs: In 24 H1, the company added 3.01% of financing costs, and capital costs were significantly reduced. By the end of the first half of '24, the company had a balance ratio of 62.42%, a net debt ratio of 59.17%, a short-term cash debt ratio of 1.63, short-term debt accounting for 16.7%, and financial stability; comprehensive financing costs were 3.25%, a decrease of 22 bps compared to the beginning of the year, and the credit advantage was remarkable.

Profit forecast, valuation and rating: Considering the recent market sales recovery, which may affect the company's sales scale and gross margin recovery, we lowered the company's 24-26 net profit forecast to 5.41/5.92/6.86 billion yuan (the original forecast was 6.68/7.3/8.12 billion yuan). The current stock price corresponds to the 24-26 PE valuation to 16.5/15.0/12.8 times, respectively. The company maintains its leading sales position in the industry. It is expected that its market share and performance will continue to increase in the future , maintaining a “buy” rating.

Risk warning: Risks such as sales and land acquisition falling short of expectations, falling short of expectations in starting construction and delivery, and exceeding expectations in the market downturn.