3Q financial investment performed well, turning losses into profits. From January to September 2024, the company achieved revenue of 11.761 billion yuan, a year-on-year decrease of 26.72%. From January to September 2024, the company successfully turned a loss into a profit, achieving net profit of 0.545 billion yuan. The main reason was the increase in net profit due to a sharp rise in the share prices of financial assets directly and indirectly held by the company in the third quarter. From January to September 2024, the company's net investment income and fair value change income were -0.198 billion yuan and 0.859 billion yuan respectively. The company's net investment income and fair value change income for the third quarter were 0.086 billion yuan and 0.817 billion yuan respectively.

The 3Q increased efforts to add soil storage, and sales are expected to take the lead in recovering. From January to September 2024, the company added 0.3529 million square meters of land reserves, a year-on-year decrease of 44.92%, and an equity area of 0.2997 million square meters, a year-on-year decrease of 22.46%. From January to September 2024, the company resumed construction area of 9.7365 million square meters, a year-on-year decrease of 21.61%, a year-on-year decrease of 0.4831 million square meters, a year-on-year decrease of 38.44%, and a completed area of 1.1188 million square meters, a year-on-year decrease of 14.52%. From January to September 2024, the company achieved a sales area of 0.2302 million square, a year-on-year decrease of 66.03%, and sales of 15.398 billion yuan, a year-on-year decrease of 51.32%. We believe that as real estate policies enter a relaxed range, first-tier cities are expected to take the lead in market recovery, and there is room for the company to benefit in the future by deepening the Beijing region.

Complete the second share cancellation and actively maintain shareholder value. In July 2024, the company held a board resolution to change the use of all second share repurchases from “for sale” to “for cancellation and corresponding reduction of registered capital”. In September 2024, the company cancelled the second repurchase of 0.079 billion shares, and the total number of shares was reduced to 2.075 billion shares. The proportion of shares held by Urban Construction Group before and after the cancellation was 43.84% and 45.51% of the company's shares, respectively.

Investment advice: Targets related to China and Turkey's valuation have a “superior to the market” rating. We forecast the company's EPS of $0.29 and $0.35 in 2024 and 2025 respectively, and the company's net assets per share in 2024 and 2025 will be $11.54 and $11.76, respectively. Referring to comparable company valuations, we gave the company a PB valuation of 0.6-0.7 times in 2024, with a corresponding reasonable value range of 6.92-8.08 yuan per share. Give the company an “better than market” rating.

Risk warning: The carry-over of company-level land development and shed improvement projects falls short of expectations, and the return on investment performance is volatile.