Core viewpoints

The performance continues to grow at a high level and the profitability is improved. In 2016, the company achieved an operating income of 8.76 billion yuan, an increase of 69.6 percent over the same period last year, and a net profit of 840 million yuan, an increase of 83.8 percent over the same period last year. The company's gross profit margin continued to rise. In 2016, the company's gross profit margin reached 44.9%, an increase of 6.6 percentage points, and after tax deduction, it reached 31.0%, an increase of 4.9 percentage points. House prices in Shanghai and Fuzhou, where the company's projects are located, have risen significantly in the past 2016, and we believe that the company's current high gross profit margin is sustainable. The company's cost of capital fell to 7.85% in 2016.

Property sales are strong. In 2016, the company realized real estate sales of 13.78 billion yuan, an increase of 100% over the same period last year, with a real estate contract area of 1.45 million. By the end of 2016, the corresponding capacity area of the land to be developed has reached 4.19 million square meters, which can be developed by the company in the next three years. By the end of 2016, the company's accounts received in advance reached 5.33 billion yuan, an increase of 64.3% over the same period last year, providing support for the sustained growth of future performance.

The financial control business is advancing rapidly and has achieved remarkable results. Progress has been made in securities investment, financial investment and industrial investment in the company's financial control business. In 2016, the company invested 2.5 billion yuan to acquire 100% of medium-range leasing, which contributed 163 million yuan to the company's net profit in 2016.

Financial forecasts and investment suggestions

Maintain the buy rating with a target price of 11.44 yuan. We forecast that the company's earnings per share from 2017 to 2019 will be 0.52,0.80,1.06 yuan respectively (the original forecast for 2017-2018 is 0.55 yuan 0.80 yuan). Using the comparable company law, the comparable company's PE in 2017 was 22 times. Give the company a PE of 22X in 2017, corresponding to the target price of 11.44 yuan.

Risk hint

The company's real estate sales fell short of expectations.

The company's financial investment fell short of expectations.