Core views:

1. Operating income has increased steadily, and performance locability is good

In recent years, Territory Holdings has developed rapidly, and the compound growth rate of operating income and gross profit has maintained a relatively rapid growth rate. In 2019, Territory Holdings achieved operating income of 7.568 billion yuan, and the compound revenue growth rate from 2016 to 2019 was 19.06%; accounts received in advance in 2019 were 2.03 times operating income. Continued rapid growth in operating income can be expected in the future, and performance lock-up is good.

2. Deeply cultivate the Chengdu-Chongqing urban agglomeration and grasp the core areas of third- and fourth-tier cities. In terms of layout logic, the company mainly uses urban agglomeration logic to further cultivate the Chengdu-Chongqing urban agglomeration. Looking at the distribution of the company's land reserves, more than half of the company's land reserves are located in the Chengdu-Chongqing urban agglomeration. The layout is mainly centered around Chengdu, radiating southwest and northeast. In terms of the city's specific location selection, the company prefers to place the project in the city center or in the area that is expected to become the city center in the near future. The layout project location is superior, and the removal pressure is relatively low.

3. The listing will further optimize the financial structure, and there is still room to improve future profitability. As the company continues to expand, the company's net debt ratio also rose rapidly from 60% in 2017 to 140% in 2019. The company's short-term cash debt ratio is 67.09%. It is unable to cover short-term debt and faces certain short-term debt repayment pressure.

We believe that the smooth listing of Territory Holdings and the entry into the capital market will broaden the financing channels for enterprises and will greatly ease the pressure on the company to repay its debts.