Events:

On August 27, the company released its semi-annual report of 2016. the operating income of the company in the first half of 2016 was 844 million yuan, down 15.75 percent from the same period last year. The net profit belonging to shareholders of listed companies was 40 million yuan, down 41.97 percent from the same period last year. Net profit after deduction was 34 million yuan, up 19.44 percent from the same period last year, and earnings per share was 0.09 percent, down 50 percent from the same period last year.

Viewpoint:

Both operating income and net profit decreased by varying degrees. In the first half of 2016, the company achieved operating income of 844 million yuan, down 15.75% from the same period last year; the total profit was 44.2 million yuan, down 36.62% from the same period last year, of which the net profit attributed to the parent company was 40.02 million yuan, down 41.97% from the same period last year.

The sharp decline in revenue and net profit in the current period is mainly due to the low gross profit margin of the project carried forward by the company during the reporting period, and the root cause of the investigation period is that the tail room of part of the project stock is processed and digested in the current period. as a result, the revenue gross profit of the real estate development business is significantly lower than that of the same overalls last year by 21.55 percentage points.

In the second half of the year, the company will pay close attention to the overall sale of the old building reconstruction project at No. 3-7 Yongxing Street, Wuyi, Hong Kong, and speed up the construction of the Nanjing Wuyi Mingshi Garden project, which is expected to be of great help to the recovery of the gross profit margin of the real estate development business. at the same time, the progress of the company's soil storage development in Tongzhou, Beijing has become clearer, and the construction of the indemnificatory apartment project has already begun. In the future, the performance release brought by other soil reserves will become an important factor supporting the company's growing performance for a long time.

Tongzhou core area is rich in land reserves. Tongzhou District is one of the key new cities in Beijing, and it is also an important base for Beijing to participate in the regional cooperation and development of the Beijing-Tianjin-Hebei economic circle. It will assume the dual responsibility of industrial development and urban development in the construction of a "sophisticated" economic structure. At present, Beijing Wuyi, a wholly owned subsidiary of the company, owns 600mu of land in Tongzhou, which is equivalent to the total land transaction in Tongzhou District in one year, with a total floor area of about 1 million square meters, which will bring new opportunities for the company's future development. According to the floor value near the reserve plot and the price of the project on sale, the current land reserve value has exceeded 20 billion yuan. Before the deadline, most of the projects in Tongzhou District have already started, and some of them have been put up for sale. with the completion of these projects, it will bring higher growth to the company's sales revenue and profits.

From the beginning of 2013 to the beginning of 2015, there were 52 comprehensive land (including residential) and commercial / office land transactions in Tongzhou. As of March 9, there were no land transactions in Tongzhou in 2016. Of the 52 plots, only 10 are comprehensive land (including residential) and residential land, with an average floor price of 7863 yuan per square meter; the remaining 35 pieces of land are commercial / office land and 7 pieces of land are industrial land. The supply of residential land in the core area of Tongzhou is already quite scarce, which reflects the great "irreplaceable" value of land owned by the company. The land transaction floor price in the core area of Tongzhou, to which Wuyi belongs in China, is higher than the average in Tongzhou, and the land transaction floor price around the company's Tongzhou project is already high, which highlights the extremely high value-added land that the company can bring in this way.

Overseas business is developing well. The company takes the general contract of construction as the basis, the real estate development as the focus, and the export-oriented economy. International contracting has certain advantages, ranking among the "top 250th international contractors in the world" for 22 consecutive years. In 2015, the gross profit margin of international contracting business reached 20.44%, which is at the advanced level of the industry. In 2015, there were 25 construction projects, with a total contract value of 4.497 billion yuan. The international project contracting business has been centered in Kenya and has been actively expanded to Uganda, Tanzania, Papua New Guinea, Ethiopia and other neighboring countries. In the first half of 2016, we also won bids for a number of projects in Kenya, Ethiopia and other places, mostly in East Africa, West Africa and Asia-Pacific markets. with Belt and Road Initiative, there will be new opportunities, but at the same time, geopolitical risks and exchange losses can not be ignored due to the slowdown in international economic growth, the drag on oil-producing countries caused by falling oil prices, and the slowdown in infrastructure investment in countries such as Africa and Southeast Asia.

Financing costs continue to fall. The company actively expands financing channels, optimizes debt structure, and uses long-term debt to convert short-term debt. On the one hand, the company signed a strategic cooperation agreement with Ping an Bank Co., Ltd. on April 7, with a marketing quota of 10 billion yuan and a credit of 10 billion yuan, indicating that the company will have no worries in the future; on the other hand, in February 2016, the company successfully completed its 2015 rights issue and raised 1.075 billion yuan, greatly optimizing the company's asset structure, and the debt-to-capital ratio dropped to 4.1 from 6.3 at the end of last year.

It is worth noting that during the reporting period, the company transferred the shares of the mainland subsidiaries (Tongzhou and Zhaoan) held by the original Hong Kong subsidiaries to the corresponding domestic companies. this adjustment of the shareholding structure will not have a fundamental impact on the profitability of the company, but it will make the ownership structure of the project company clearer.

Conclusion:

At present, there are still 600 mu of land to be developed on the south side of Wuyi Garden in Tongzhou, Beijing. according to the relevant planning, the total construction area of the project is about 1 million square meters, most of which are residential land. As the overall planning of Tongzhou District has not been finalized in the early stage, with the positioning of Tongzhou Administrative Deputy Center and the promotion of specific projects, there are no factors hindering the progress of the project, and we expect the project to enter the pre-sale period in 2016. it will bring high growth to the company's sales and profits.

In addition, the company's overseas business development momentum is also very good, in the first half of the year have won bids in Kenya, Ethiopia and other places, providing a guarantee for the growth of the company's project contracting business performance.

We expect the company's operating income from 2016 to 2018 to be 2.858 billion yuan, 3.498 billion yuan and 4.414 billion yuan respectively, the net profit attributable to the shareholders of the listed company is 248 million yuan, 271 million yuan and 283 million yuan respectively, and the earnings per share are 0.50,0.54,0.57 yuan respectively, corresponding to the PE of 35.72,32.69 and 31.30 respectively, maintaining the company's "highly recommended" rating.