Core views:

In the first half of 2021, China Aoyuan insisted on sustainable and high-quality development and maintained prudent land acquisition. The annual land purchase amount was kept within 20% of that year's contract sales. Benefiting from the company's outstanding urban renewal capabilities, the land storage structure was continuously optimized. In a period where land acquisition and profit in the open market were becoming increasingly difficult, Aoyuan's urban renewal project would become the engine for accelerated performance.

1. Performance is improving steadily, and there is a high possibility that goals will be achieved

From January to June 2021, China's Aoyuan achieved sales of 67.59 billion yuan, an increase of 32.9% over the previous year, and achieved 45.1% of its sales target. Judging from Aoyuan's 2021 price distribution ratio, the first half of the year: the second half of the year was about 41:59, making it more likely that the sales target will be achieved. We believe that in addition to the excellent performance of its main real estate business, the steady increase in the performance of China's Aoyuan business also has a lot to do with its “dual engine drive.” China Aoyuan insists on the collaborative development of the two major sectors of “Happy Living” and “Yuekang Life”. Among them, Yuekang Life includes non-real estate industries such as property management, commercial operation, cultural tourism, beauty and health, and continues to empower the main business through the development of these diversified businesses.

2. Urban renewal accelerated transformation. In the first half of 2021, the value of goods provided reached 76%. Since centralized land supply was implemented in 2021, the difficulty of acquiring land in the open market has increased, and profit margins have also been strictly limited. The ability of housing enterprises to acquire land through other means is becoming more and more important. While China's Aoyuan was deployed ahead of schedule, urban renewal accelerated transformation, and at the same time leveraged the traditional advantages of mergers and acquisitions. The construction area acquired through diversified methods such as mergers and acquisitions and urban renewal accounted for 86% of the total new construction area in the first half of 2021.

3. Expense management and control capabilities continue to improve. China's Aoyuan actively manages debt by continuously optimizing its debt structure. It achieves the goal of reducing liabilities and increasing net assets by promoting repayment, reconciliation, cost reduction, and quick delivery. It is estimated that interest-bearing debt will fall by no less than 5% each year. The net debt ratio will drop 2.0 percentage points to 80.7% from the end of 2020. The ratio of short-term cash debt has stabilized 1.3 times, and the balance ratio after excluding advance payments increased 0.1 percentage points to 78.5% from the end of 2020. At the same time, China's Aoyuan's financing capacity continues to improve, and the average financing cost from January to June 2021 has risen to 1