The performance in the first half of 2022 was lower than we expected.

The company announced its results for the first half of 2022: operating income was 5.1 billion yuan, down 12% from the same period last year; net profit returned to its mother was 1.1 billion yuan, down 45% from the same period last year, lower than we expected.

The lower-than-expected profit of the company is mainly due to the fact that the financial expenses during the ① period increased by nearly 40% compared with the same period last year, driving the expense rate to 18.2% year-on-year (11.9% for the whole of 2021). Under the influence of the ② epidemic, the company's joint venture recorded a large loss, resulting in an investment loss of 140 million yuan (compared with a loss of only 5 million yuan in the same period last year). During the ③ period, the company's non-operating income decreased by 440 million yuan compared with the same period last year (due to the high base caused by the large compensation in the same period of last year), and the company's net profit finally fell by more than 40% compared with the same period last year.

The rental rate of office and commercial property in Shanghai is basically stable, while that in Tianjin is significantly lower. At the end of the first half of 2022, the rental rate of Grade An office buildings / major commercial properties in Shanghai remained stable / decreased by 4% compared with the end of the first quarter, and the average rent in the second quarter increased by 1.9% from the first quarter to 8.11 RMB 10.25 yuan per square meter per day. The rental rate of Grade An office buildings / major commercial properties in Tianjin decreased by 140.10 percentage points respectively compared with the end of the first quarter, and the average rent in the second quarter remained stable / increased by 2 percentage points compared with the first quarter to 3.45pm 2.67 yuan / square meter / day.

Trend of development

Residential sales are under pressure in the first half of the year, paying attention to the pace of new market sales in the second half of the year. In the first half of 2022, the company mainly sold projects for Tianjin Marine Garden Phase II and Suzhou Jinxiu Lanshan Jinyuan, with a total sales area of 15400 square meters (down 57% from the same period last year), sales amount of 599 million yuan (down 79% from the same period last year), and the overall removal rate of 51%. In the second half of the year, the company plans to focus on the opening and sales of No. 54 Qiantan, and we suggest that we pay attention to the pace and sales of the project.

Year-round rental cash flow is still under some pressure. In the first half of 2022, the cash inflow of company-held property rentals fell 9% to 1.72 billion yuan compared with the same period last year, of which office / commercial / hotel / residential property rental inflows were-5%, 50%, 75%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50%, 50% and 14.9 trillion yuan, respectively. Looking forward, we believe that the company's annual rental cash flow is still under pressure, but the company's measures to accelerate the removal of vacant stock area and actively promote and stabilize investment are expected to reduce the negative impact of the epidemic on cash flow to a certain extent.

Profit forecast and valuation

Taking into account the settlement pace of residential property and the potential impact of the epidemic, the operating income of 2022amp 2023 was reduced by 9% of its operating income to RMB 1.288 billion, and the net return profit of 2022max in 2023 was reduced by 7% of its net profit in 2023 to RMB 39,000,000. The current A share / B share price corresponds to the price-to-earnings ratio of 10.4x2022x2023x202xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx; Considering that the value of self-owned properties in the company's core city is expected to be repaired, the A-share neutral rating and 10.96 yuan target price will be maintained, corresponding to 11.3x2022x2023 P / E ratio, which is 8% upside compared to the current share price. B-share neutral rating and target price of US $0.88 will be maintained, corresponding to 6.0x2022x2023 P / E ratio of 6.0gamma, which is 0.6% lower than the current stock price.

Risk

The duration and impact of the epidemic exceeded expectations, and the development of the financial business sector was lower than expected.