24H1's performance was dragged down by equity investment. The company that maintained the “buy” rating issued a performance pre-loss announcement on July 9. Net profit to the mother was still hampered by equity investment, but the real estate business was profitable; we expect that with the steady progress of key projects such as Tiantanfu and Linhe Village, the company's performance in the second half of the year is expected to improve. Furthermore, the company established another subsidiary in Yangpu District of Shanghai, maintained a high level of land acquisition intensity in Beijing and Shanghai, and continued to fulfill its resource endowments. With the optimization of Beijing's real estate policy, we expect that the year-on-year decline in the company's sales amount in the second half of the year is also expected to gradually narrow. We maintain the 24-26 EPS profit forecast of 0.47/0.63/0.68 yuan. Comparatively, the average of 24PE is 11 times that of the company. We still think that the company's reasonable 24PE is 11 times, and the target price is 5.17 yuan, maintaining a “buy” rating.

Equity investment is dragging down profits, and is expected to continue to improve in the second half of the year as key projects are carried over. According to the company's announcement, the company expects 24H1 to have a net loss of 0.131-0.195 billion yuan, and the 24H1 loss margin is narrower than that of 0.33 billion yuan in 24Q1. The company's performance was still disrupted by equity investment. Guoxin Securities (002736 CH), which is directly held by 24H1, rose 4.8%, bringing fair value income of 0.116 billion yuan, but Nanwei Medical (688029 CH), which is indirectly held, fell 35.4%, resulting in an investment loss of 0.429 billion yuan. The combined loss of the two was 0.313 billion yuan. After excluding the impact of equity investment, the company's real estate business was profitable, and we expect that with the steady handover of key projects such as Tiantanfu and Linhe Village shed renovation, the company's performance in the second half of the year is expected to improve further.

Continue to acquire high-quality plots in Beijing and Shanghai to realize the advantages of resource endowments

According to the company's announcement, on July 9, the company cooperated with Yuexiu Real Estate (0123 HK) to compete for a plot of land in Changbai Community in Yangpu District, Shanghai, with a floor area of 0.0317 million square meters, with a total price of 2.23 billion yuan, and an equity ratio of 51%.

Since the beginning of the year, the company has won a total of 4 parcels of land, 2 in Beijing and Shanghai, with a total land acquisition price of 5.904 billion yuan and a total equity price of 4.216 billion yuan, maintaining a high level of land acquisition intensity in core cities. In addition, the company continues to highlight its resource endowment advantages: on the one hand, the Linhe Village plot in Shunyi District, Beijing, which was obtained through bidding; on the other hand, the company became the main implementer of the first phase of the bungalow shantytown renovation project within the old town of Tongzhou District of Beijing to expand the management fee business. At the same time, it is also expected to refer to the Linhe Village model to obtain resources after the project enters the bidding phase.

Beijing is rich in land reserves, and sales are expected to benefit from real estate policy optimization

According to data from the China Index Institute, 24H1 achieved sales volume of 12.4 billion yuan, -46% over the same period last year, mainly affected by market adjustments in Beijing and reduced sales. Beijing accounted for 59% of the company's land storage and construction at the end of '23. We expect Beijing to account for a relatively high sellable value in '24. On June 26, Beijing further optimized its real estate policy, which is expected to push the market to bottom up and repair. According to data from the Shell Research Institute, the KMI index for second-hand housing and new housing in Beijing was boosted after the New Deal. Among them, second-hand housing KMI stood at the balance between boom and bust. We expect that the company's sales are also expected to benefit from policy optimization, and the year-on-year decline in the second half of the year is expected to gradually narrow.

Risk warning: Beijing regional market risk, risk of shed reform and first-level development projects falling short of expectations, risk of performance fluctuations due to equity investment and minority shareholders' profit and loss ratio.