Results Need Time to Improve, Low Valuation, Maintain "Buy"

Modern Land (01107 HK) Property Sector Equity Research 股票研究公司报告证券研究报告 Equity Research Report Company Report Company Report: Modern Land (01107 HK) 公司报告 : 当代置业 (01107 HK) Van Liu 刘斐凡 (86755) 2397 6672 liufeifan@gtjas.com Results Need Time to Improve, Low Valuation, Maintain "Buy" 业绩需要时间改善, 低估值, 维持 买入 Contracted sales is expected to maintain fairly fast growth due to sufficient saleable resources and green future pipeline. From Jan. to Apr. 2018, the Company achieved contracted sales of RMB6.6 bn, up by 33.5% YoY, achieving 20.6% of its 2018 sales target so far. Gross margins are expected to recover due to unit land costs being relatively not high and relatively quality land bank. Unit land costs dropped by 109.2% YoY to RMB3,517 per sq.m. in 2017. Around 71.0% of the Company's land bank was in tier-1, tier-2 and tier-3 cities around metropolitan areas. In addition, we estimate that the unit land cost for total land bank will be approximately RMB3,833 per sq.m., 37.8% of ASP during Jan.-Apr. 2018. Top line increased by 0.6% YoY to RMB8,506 mn. Underlying net profit decreased 17.4% YoY to RMB534 mn, missing our expectation. However, we expect the top line to ultimately boom in 2019, along with advance payments from property pre-sales of RMB13.1 bn as at 31 Dec. 2017. The Company will maintain a high leverage ratio, but this is in line with fairly fast contracted sales growth. As we have revised down underlying net profit, we have also revised down the target price from HK$2.12 to HK$1.98, which represents a 61% discount to its revised 2018F NAV of HK$5.08 per share, 7.0x underlying 2018 PER and 0.9x 2018 PBR. However, the Company's valuation remains low. We maintain "Buy". Risk factors: lower-than-expected contracted sales and further monetary policy tightening. 由于充足可售货源和绿色产品线, 合约销售很有可能延续较快增长 2018 年 1-4 月, 公 司录得人民币 66 亿元的合约销售, 同比增长 33.5%, 达成 2018 年销售目标的 20.6% Rating: Buy Maintained 评级 : 买入 ( 维持 ) 6-18m TP 目标价 : HK$1.98 Revised from 原目标价 : HK$2.12 Share price 股价 : Stock performance 股价表现 HK$1.480 房地产行业 不高的单位土地成本与相对有质量的土地储备, 毛利率预计恢复 公司的单位土地成本于 2017 年同比下降 109.2% 至人民币 3,517 元每平米 公司约有 71.0% 的土储位于一线, 二 线城市以及都市圈周围的三线城市 另外, 我们测算总土储的单位土地成本约为人民币 3,833 每平米, 为 2018 年 1-4 月销售均价的 37.8% 总收入同比增长 0.6% 到人民币 8,506 百万元 核心净利同比下降 17.4% 到人民币 534 百 万元, 低于我们预期 但是, 伴随 2017 年 12 月 31 日末达到人民币 131 亿元的房屋已售 预收款, 我们预计收入最终将在 2019 年爆发 公司将保持高负债率, 但这与较为快速的合约销售增长一致 由于下调了核心净利, 我们 将目标价从 2.12 港元下调至 1.98 港元, 相当于较 5.08 港元的 2018 年每股净资产有 61% 的折让, 也分别相当于 7.0 倍 2018 年核心市盈率和 0.9 倍 2018 年市净率 然而, 公司估 值仍然低 我们维持 买入 风险 : 低于预期的合约销售和货币政策进一步收紧 [Table_PriceChange] Change in Share Price 股价变动 Abs. % 绝对变动 % Rel. % to HS Index 相对恒指变动 % Avg. Share price(hk$) 平均股价 ( 港元 ) 1 M 1 个月 Source: Bloomberg, Guotai Junan International. 3 M 3 个月 1 Y 1 年 0.7 (15.4) 31.3 0.4 (14.1) 9.0 1.5 1.7 1.5 [Table_ Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 12/31 (RMB m) (RMB m) (RMB) ( %) (x) (RMB) (x) (RMB) (%) (%) 中当外代运置输业 2016A 8,458 664 0.307 0.7 4.3 2.146 0.6 0.063 4.8 15.8 2017A 8,506 706 0.256 (16.6) 4.7 1.874 0.6 0.047 3.9 14.4 2018F 9,442 757 0.274 7.0 4.4 1.880 0.6 0.051 4.3 14.6 2019F 14,823 1,001 0.362 32.1 3.3 2.245 0.5 0.068 5.7 17.6 2020F 16,032 1,094 0.396 9.4 3.0 2.245 0.5 0.080 6.6 17.6 [Table_BaseData] Shares in issue (m) 总股数 (m) 2,763.6 Major shareholder 大股东 Zhang Lei 66.8% Market cap. (HK$ m) 市值 (HK$ m) 4,109.5 Free float (%) 自由流通比率 (%) 33.2 3 month average vol. 3 个月平均成交股数 ( 000) 2,699.1 FY18 Net gearing (%) FY18 净负债 / 股东资金 (%) 79.6 52 Weeks high/low (HK$) 52 周高 / 低 (HK$) 1.045 / 2.060 FY18 Est. NAV (HK$) FY18 每股估值 ( 港元 ) 5.1 See the last page for disclaimer Page 1 of 8

Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Housing sales growth decreased but strong investment beat market expectations. During Jan.-Mar. 2018, the YoY increase in commodity house sales decreased compared to that during Jan.-Feb. 2018. Investment remained strong and beat market expectations. GFA newly started rebounded during Jan.-Mar. 2018. In addition, saleable areas extended downside momentum. Subsequently, we saw steady fundamentals for the property market. Figure 1: Cumulative House Sales Amount in China Figure 2: Cumulative House Sales GFA in China 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 7 6 5 4 3 2 - -2-3 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 5 4 3 2 - -2-3 Amount Sold of Commodity Houses (LHS)(RMB bn) Amount Sold of Residential Houses (LHS) (RMB bn) Amount Sold YTD YoY of Commodity Houses (RHS) Amount Sold YTD YoY of Residential Houses (RHS) Source: National Bureau of Statistics of China, Guotai Junan International. GFA Sold of Commodity Houses (LHS)(sq.m. mn) GFA Sold of Residential Houses (LHS) (sq.m. mn) GFA Sold of Commodity Houses (RHS) GFA Sold of Residential Houses (RHS) Source: National Bureau of Statistics of China, Guotai Junan International. For the policy and monetary environment, the key note of healthy property market maintenance will not change. Currently, we expect a tightening up of the monetary environment alongside gradual rate hikes in the US and the beginning of new asset management regulation in China. While, on 23 Apr. 2018, the Political Bureau Conference of the CPC Central Committee proposed to expand demand and to stabilize the property market. Thus, targeted policies will be maintained to promote the steady and sound development of the property sector. However, we think that commodity housing sales will only experience limited decline. Urbanization, demand from housing replacement and monetization of squatter settlement rebuilding will lead to sustainable housing demand in 2018-2020. Moreover, if the property market starts to slump, the policy and credit environment related to the property sector should ease again to stabilize the property market as per the last round of policy easing which started on 30 Sep. 2014. Figure 3: Key Property Development and Sales Data 3 2 - -2-3 -4 10.5% 7.7% 13.5% 8.1% 22.5% 15.8% 8.8% 6.5% 19.8% 7.0% 8.9% 2.0% 17.3% 1.0% 7.5% 2013 2014 2015 2016 2017 2018F -10.7% -2.0% -14.0% -7.6% -14.0% -7.0% -3.4% -31.7% GFA Newly Started YTD YoY Land Area Sold YTD YoY Investment YTD YoY GFA Sold of Commodity Houses Source: National Bureau of Statistics of China, Guotai Junan International. Contracted sales is expected to gain fairly rapid growth in 2018. In 2017, contracted sales reached RMB22.2 bn, up by 33.9% YoY, achieving 100.8% of its 2017 sales target. Accumulated contracted sales in terms of GFA amounted to 1,802,682 sq.m., up 25.8% YoY. Sales target and saleable resources in 2018 reached RMB32.0 bn (indicating 44.2% YoY growth) and RMB 57.5 bn (indicating 55.7% target sale-through rate), respectively. With sufficient saleable resources and low target sell-through rate, we think that the Company's contracted sales target is achievable. As per the Company s plan, saleable resources in Beijing, Shanghai, Shanxi, Hubei and Fujian will amount to approximately RMB13.4 bn, RMB1.2 bn, RMB5.0 bn, RMB7.7 bn and RMB 5.0 bn, respectively. In addition, with the further awareness of friendly living environment and consumption upgrade, a green pipeline could become more favorable. Thus, we expect contracted sales to maintain upside momentum. During Jan. to Apr. 2018, Modern Land recorded RMB6.6 bn in contracted sales, up 33.5% YoY. Accumulated contracted sales in terms of GFA amounted to 638,530 sq.m., up 28.0% YoY. The Company has achieved 20.6% of its 2018 sales target so far. See the last page for disclaimer Page 2 of 8

Table 1: The Company s saleable resources in 2018 Region 2018 saleable area (sq.m.) 2018 saleable amount (bn) Beijing 406,246 13.4 Shanghai 65,478 1.2 Shanxi 516,511 5.0 Hunan 311,707 3.3 Jiangxi 37,071 0.4 Hubei 938,093 7.7 Anhui 305,804 4.6 Jiangsu 159,919 3.9 Shanxi 101,769 2.3 Guangfo 306,424 5.1 Fujian 315,058 5.0 Pan-Beijing 185,402 1.6 Guizhou 191,422 1.0 Zhejiang 278,240 3.0 Total 4,119,144 57.5 Gross profit margin is expected to slightly rally. At the end of 2017, the Company had a total land bank size of 6.5 mn sq.m., up 20.2% compared with the end of 2016. In 2017, the Company acquired 13 land parcels with a unit land cost of RMB3,517 per sq.m., down by 109.2% YoY. On the other hand, the Company decreased its land bank portion in tier-1 cites (Beijing, Shanghai and Guangzhou) and tier-2 cities (mainly provincial cities in central China and international cities) from around 81% in 2016 to around 71% in 2017. We still think that the Company s land bank was mainly exposed in higher-tier cities. We estimate the unit land cost for total land bank to be approximately RMB3,833 per sq.m., 37.8% of ASP during Jan.-Apr. 2018. With land costs not considered high and relative quality land banks, gross profit margin is expected to slightly rebound after 2018. Therefore, we estimate gross margins to remain over 22.0% in the next three years. Figure 4: The Company s Land Bank Breakdown by City Tier in 2016 Figure 5: The Company s Land Bank Breakdown by City Tier in 2017 Others, 19% tier-1, 15% Others, 29% tier-1, 14% tier-2, 66% tier-2, 57% Source: the Company. Source: the Company. The Company s average funding costs are expected to slight increase and the net gearing ratio is expected to remain at a high level. Weighted average financial costs declined by 0.6 ppts to 7.5% in 2017. When comparing to average funding costs of the sector leaders, the Company's average funding costs were high. With monetary tightening, we expect that average funding costs would have a slight increase in 2018. Net gearing ratio has increased for three consecutive years since 2015, from 44.6% in 2015 to 83.1% in 2017. In order to maintain fairly fast growth for contracted sales, we expect that net gearing ratio will remain at over 79.0% during 2018-2020. See the last page for disclaimer Page 3 of 8

Figure 6: The Company s Debt Structure by Currency in 2017 Figure 7: The Company s Net Gearing Ratio and Weighted Average Funding Costs HKD, 7% RMB, 57% 12.0% 8.0% 10.5% 8.1% 7.5% 9 8 7 6 6.0% 4.0% 2.0% 44.6% 68.9% 83.1% 5 4 3 2 USD, 36% 2015 2016 2017 Net Gearing Ratio (RHS) Weighted Average Funding Costs (LHS) Source: the Company. Source: the Company. 2017 underlying net profit missed our expectation. The top line slightly increased by 0.6% YoY to RMB8,506 mn in 2017. Gross profit amounted to RMB1,790 mn, up 8.7% YoY due to gross margin improvement. With more land appreciation tax paid, net profit increased 6.3% YoY to RMB706 mn, which missed our expectation. Underlying net profit decreased 17.4% YoY to RMB534 mn, which still missed our expectation riding on less GFA delivered. GPM increased 1.5 ppts YoY to 21.0%. Net profit margin increased 0.4 ppts YoY to 8.3%. Net gearing ratio increased 14.2 ppts YoY. Cash balance rose a significant 53.9% YoY to RMB10,410 mn due to more cash collection from contracted sales and debt scale expansion. Table 1: Comparison of the Company s Balance Sheet and Income Statement in 2016 and 2017 RMB mn 2016 2017 Change Total revenue 8,458 8,506 0.6% Gross profit 1,646 1,790 8.7% GPM 19.5% 21.0% 1.5 ppts NP (Inc. after-tax fair value gains on IP and exchange losses) 664 706 6.3% NP (Ex. after-tax fair value gains on IP and exchange losses) 647 534-17.4% NPM (Inc. after-tax fair value gains on IP and exchange losses) 7.9% 8.3% 0.4 ppts NPM (Ex. after-tax fair value gains on IP and exchange losses) 7.6% 6.3% -1.3 ppts DPS (RMB cent) 6.300 4.707-25.3% Underlying EPS (RMB cent) 30 19-35.3% Cash and cash equivalents 4,584 7,534 64.3% Total asset 28,507 45,171 58.5% Properties under development 12,608 22,569 79.0% Total debt 23,776 38,154 60.5% Shareholders' equity 4,648 5,178 11.4% ROE 15.8% 14.4% -1.4 ppts Net gearing ratio 68.9% 83.1% 14.2 ppts We revise down underlying profit estimations. We expect that Modern Land's contracted sales will maintain upside momentum due to sufficient saleable resources and favorable pipelines. However, the Company needs a longer time than our expectations to finally deliver houses to purchasers. That is, compared with our previous expectations, the top line will be further delayed to reflect strong contracted sales growth since 2015. We expect the top line to ultimately boom in 2019, along with advance payments from property pre-sales of RMB13.1 bn as at 31 Dec. 2017. Therefore, we revise down 2018F and 2019F total revenue by 9.9% and 2.1% to RMB9,442 mn and RMB14,823 mn, respectively. We expect gross margins to further recover but lower than our previous expectations. In addition, gross margin in 2017 missed our previous expectations. We have revised down 2018F and 2019F gross margin by 0.6 ppts and 0.3 ppts, respectively. However, land appreciation tax in 2017 was higher than our previous expectation. Therefore, we revise up land appreciation tax in 2018F and 2019F. Overall, we revise down 2018F and 2019F underlying net profit by 13.5% and 16.4% to RMB636 mn and RMB910 mn. Net gearing ratios in 2017 were higher than our previous assumptions, and we have revised up net gearing ratios in 2018F and 2019F by 11.9 ppts and 21.2 ppts, respectively. See the last page for disclaimer Page 4 of 8

Table 2: Revisions to 2017-2019 Profit Estimations RMB mn New estimation Old estimation Change 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F Total revenue 9,442 14,823 16,032 10,482 15,146 n.a. -9.9% -2.1% n.a. Gross profit 2,126 3,382 3,721 2,418 3,505 n.a. -12.1% -3.5% n.a. Operating profit 1,278 2,047 2,286 1,621 2,365 n.a. -21.1% -13.5% n.a. Net profit 870 1,205 1,318 859 1,236 n.a. 1.3% -2.5% n.a. Underlying profit 636 910 1,014 736 1,088 n.a. -13.5% -16.4% n.a. Gross margin 22.5% 22.8% 23.2% 23.1% 23.1% n.a. -0.6 ppts -0.3 ppts n.a. Operating profit margin 13.5% 13.8% 14.3% 15.5% 15.6% n.a. -1.9 ppts -1.8 ppts n.a. Net profit margin 9.2% 8.1% 8.2% 8.2% 8.2% n.a. 1.0 ppts 0.0 ppts n.a. Underlying net profit margin 6.7% 6.1% 6.3% 7.0% 7.2% n.a. -0.3 ppts -1.0 ppts n.a. ROE 14.6% 17.6% 17.6% 15.4% 20.2% n.a. -0.8 ppts -2.6 ppts n.a. ROCE 3.4% 4.2% 4.2% 4.3% 6.0% n.a. -0.9 ppts -1.8 ppts n.a. ROA 1.6% 1.7% 1.5% 2.1% 2.8% n.a. -0.5 ppts -1.1 ppts n.a. Net gearing ratio 79.6% 79.4% 79.6% 67.7% 58.2% n.a. 11.9 ppts 21.2 ppts n.a. Source: Guotai Junan International. Maintain "Buy". The Company's contracted sales is expected to maintain upside momentum. In addition, we believe that with land cost relatively not being high and relatively quality land banks, this will drive the Company's gross margins to slightly rally. The Company will maintain a high leverage ratio, but this is in line with the fairly fast contracted sales growth. We expect the top line to ultimately boom in 2019 along with advance payments from property pre-sales of RMB 13.1 bn as at 31 Dec. 2017. Thus, results need time to improve. However, last closing price implied 2018, 2019 and 2020 underlying PER was only 5.2x, 3.6x and 3.3x, respectively. The Company's valuation remains low. As we revise down underlying net profit, we revise down target price from HK$2.12 to HK$1.98, which represents a 61% discount to its revised 2018F NAV of HK$5.08 per share, 7.0x underlying 2018 PER and 0.9x 2018 PBR. We maintain our investment rating as "Buy". Risk factors include lower-than-expected contracted sales and further monetary policy tightening. Table 3: Breakdown of Modern Land s 2018NAV NAV summary results Development properties (RMB mn) 16,111 Investment properties (RMB mn) 944 Total gross asset value (RMB mn) 17,056 (Net debt)/net cash(rmb mn) (5,693) NAV (RMB mn) 11,362 NAV/share (RMB) 4.11 NAV/share (HK$) 5.08 TP discount to NAV 61% Target price (HK$) 1.98 2018F Figure 8: Modern Land 3-Year Historical P/B Figure 9: Modern Land 3-Year Historical P/E Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International. See the last page for disclaimer Page 5 of 8

Table 4: Peers Comparison Company Stock Code Mkt Cap (HK$ m) Last Price HK$ PE PB D/Y% ROE EV/EBITDA 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2018F 2018F HK listed large developers with major revenue from mainland China Overseas Land & Invest 00688 HK 286,504.7 26.150 7.1 6.0 5.2 1.0 0.8 0.7 3.6 14.5 5.5 Evergrande Real Estate Group 03333 HK 330,759.8 25.100 6.9 5.7 4.7 2.0 1.7 1.3 8.4 33.7 5.4 China Resources Land Ltd 01109 HK 195,105.9 28.150 8.0 6.8 5.8 1.2 1.1 0.9 4.3 16.3 5.2 Bbmg Corporation-H 02009 HK 51,552.1 3.480 7.9 6.8 6.2 0.6 0.5 0.5 2.2 7.1 9.3 Country Garden Holdings Co 02007 HK 343,023.9 15.780 8.1 6.0 5.0 2.2 1.8 1.4 4.2 29.4 4.0 Longfor Properties 00960 HK 136,665.2 23.100 8.7 6.9 5.6 1.4 1.2 1.1 4.5 17.4 8.0 Agile Property Holdings Ltd 03383 HK 60,870.9 15.540 6.7 5.4 4.4 1.1 1.0 0.9 6.9 17.2 3.5 Soho China Ltd 00410 HK 20,538.1 3.950 36.8 28.6 24.1 0.5 0.5 0.5 4.1 1.5 26.8 Shimao Property Holdings Ltd 00813 HK 71,974.2 21.250 6.3 5.2 4.1 0.9 0.8 0.7 6.1 14.7 7.0 Guangzhou R&F Properties - H 02777 HK 58,647.1 18.200 4.7 3.9 3.2 0.7 0.7 0.6 8.5 15.7 6.3 Sino-Ocean Land Holdings 03377 HK 41,652.4 5.490 6.8 5.7 4.5 0.7 0.6 0.5 6.4 10.0 6.4 Franshion Properties 00817 HK 50,242.8 4.340 8.1 6.2 4.4 1.0 0.9 0.8 4.9 13.2 10.4 Shui On Land Ltd 00272 HK 16,930.0 2.100 9.0 8.2 7.1 0.3 0.3 0.3 2.8 4.1 8.9 Kwg Property Holding Ltd 01813 HK 33,949.5 10.760 5.8 4.4 3.6 0.9 0.8 0.7 6.0 15.6 11.1 Yuexiu Property Co Ltd 00123 HK 21,454.3 1.730 6.9 5.6 4.7 0.5 0.5 0.5 5.7 7.4 8.9 Shenzhen Investment Ltd 00604 HK 25,465.3 3.160 8.4 7.2 7.4 0.6 0.5 0.5 5.8 7.1 6.5 Hopson Development Holdings 00754 HK 18,516.7 8.320 13.2 13.0 n.a. n.a. n.a. n.a. 2.3 n.a. n.a. Yuzhou Properties Co 01628 HK 24,817.2 5.930 5.3 4.0 3.4 1.1 0.9 0.7 6.7 22.2 3.4 Greentown China Holdings 03900 HK 23,064.1 10.640 8.7 7.8 7.2 0.7 0.6 0.5 2.2 6.6 11.5 China Aoyuan Property Group 03883 HK 17,028.0 6.350 5.7 4.2 3.2 1.1 0.9 0.8 5.8 22.0 5.0 Kaisa Group Holdings Ltd 01638 HK 25,225.1 4.160 3.1 2.3 2.4 n.a. n.a. n.a. 2.2 38.5 n.a. China Vanke Co Ltd-H 02202 HK 361,875.7 29.700 7.6 6.2 5.6 1.7 1.4 1.3 4.8 22.9 3.5 Median 7.3 6.0 4.7 0.9 0.8 0.7 4.9 15.6 6.4 Simple Average 8.6 7.1 5.8 1.0 0.9 0.8 4.9 16.1 7.8 Weighted Average 7.7 6.2 5.2 1.5 1.2 1.0 5.2 21.3 5.7 HK listed mid-small developers with major revenue from mainland China Overseas Grand Oceans 00081 HK 12,016.0 3.510 5.3 4.1 3.6 0.6 0.5 0.4 1.5 11.4 4.3 Poly Property Group Co Ltd 00119 HK 13,328.0 3.640 6.6 6.8 3.6 0.5 0.5 n.a. 4.1 7.1 7.4 ShInd Urban 00563 HK 8,034.3 1.670 9.8 8.8 n.a. 0.6 0.6 n.a. 3.0 6.3 n.a. Modern Land China Co Ltd 01107 HK 4,109.5 1.480 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Powerlong Real Estate Holdin 01238 HK 16,349.0 4.090 3.1 2.4 2.0 0.4 0.4 0.3 7.7 15.6 n.a. C C Land Holdings Ltd 01224 HK 6,988.2 1.800 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Fantasia Holdings Group Co 01777 HK 8,817.2 1.530 5.2 4.0 3.2 0.4 0.3 0.3 5.9 7.5 n.a. Yuexiu Real Estate Investmen 00405 HK 15,862.1 5.240 14.2 17.0 17.0 0.9 0.9 0.9 7.1 6.5 21.1 Central China Real Estate 00832 HK 8,719.4 3.560 6.5 4.4 4.1 0.8 0.7 0.7 4.3 13.3 3.9 China Sce Property Holdings 01966 HK 14,989.5 3.920 4.7 3.5 2.5 0.9 0.8 0.6 6.8 18.9 2.4 Top Spring International Hld 03688 HK 4,401.5 3.180 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Beijing Capital Land Ltd-H 02868 HK 12,233.0 4.040 n.a. n.a. n.a. n.a. n.a. n.a. 8.2 n.a. n.a. Zhong An Real Estate Ltd 00672 HK 2,967.0 0.510 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Beijing North Star Co Ltd-H 00588 HK 15,563.2 2.890 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. China South City Holdings 01668 HK 13,536.2 1.690 8.2 7.1 5.6 0.4 0.4 0.4 4.0 10.5 14.3 Glorious Property Holdings 00845 HK 5,143.1 0.660 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Median 6.5 4.4 3.6 0.6 0.5 0.4 5.1 10.5 5.8 Simple Average 7.1 6.5 5.2 0.6 0.6 0.5 5.3 10.8 8.9 Weighted Average 7.1 6.6 5.5 0.6 0.6 0.5 5.5 11.2 9.5 See the last page for disclaimer Page 6 of 8

Financial Statements and Ratios Income Statement Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Total Revenue 8,458 8,506 9,442 14,823 16,032 Sales of Properties 8,235 8,283 9,123 14,413 15,538 Other Income 104 94 103 112 123 Cost of sales (6,812) (6,716) (7,317) (11,440) (12,311) Gross Profit 1,646 1,790 2,126 3,382 3,721 - Selling and Marketing Costs (304) (301) (325) (518) (563) - Administrative Expenses (344) (479) (523) (817) (872) Operating Profit 998 1,010 1,278 2,047 2,286 Change in Fair Value of IPs 80 74 98 103 108 - Finance Income/(Costs), Net (182) (393) (455) (619) (667) - Others 17 14 15 16 16 - Other Gains Net 170 653 505 466 467 Profit before Tax 1,083 1,358 1,441 2,012 2,211 Income Tax (369) (531) (571) (807) (892) Profit after Tax 714 827 870 1,205 1,318 Non-controlling Interest (50) (121) (113) (205) (224) Shareholders' Profit / Loss 664 706 757 1,001 1,094 Adjusted net profit 647 534 636 910 1,014 Basic EPS 0.307 0.256 0.274 0.362 0.396 Underlying EPS (RMB) 0.299 0.193 0.230 0.329 0.367 Cash Flow Statement Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Operating activities Profit Before Taxation 1,083 1,358 1,441 2,012 2,211 Finance Costs 182 393 455 619 667 D&A 24 50 53 57 60 Changes in Fair Value of IPs (80) (74) (98) (103) (108) Others (176) (346) (239) (210) (205) Changes in Working Capital: (3,183) (1,790) 561 (1,835) 91 Net Cash from Operations (2,150) (409) 2,173 540 2,716 Income Taxes Paid (676) (296) (458) (687) (765) Cash from Operating Activities (2,826) (705) 1,715 (147) 1,951 Investing activities Net Loans from Joint Ventures (1,209) (1,026) (319) (351) (386) Advances to Related Parties (775) (2,055) (270) (297) (326) Purchase of PPE (49) 34 (59) 4 7 Other Investing Cash Flow (23) (695) (24) (11) 1 Cash from Investing Activities (2,056) (3,743) (672) (655) (705) Financing activities Debt Raised/(Repaid) 3,269 8,436 4,071 3,184 2,192 Dividend Paid (173) (130) (141) (189) (220) Interest Paid (767) (1,193) (1,382) (1,879) (2,025) Other Financing Cash Flow 4,626 292 255 281 309 Cash from Financing Activities 6,955 7,405 2,803 1,396 255 Net Changes in Cash 2,074 2,957 3,846 594 1,502 Cash at Beg of Year 2,521 4,584 7,534 11,373 11,963 Exchange Losses (10) (8) (6) (5) (4) Cash at End of Year 4,584 7,534 11,373 11,963 13,460 [Table_BalanceSheet] Balance Sheet Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Investment Properties 1,820 1,965 2,013 2,019 1,981 Property, Plant and Equipment 517 484 542 539 532 Other Non-current Assets 3,262 6,498 7,098 7,757 8,481 Total Non-current Assets 5,599 8,947 9,653 10,314 10,994 Cash & Cash Equivalents 4,584 7,534 11,373 11,963 13,460 Properties under Development for Sale 10,331 20,173 33,489 46,673 59,983 Properties Held for Sale 2,277 2,396 2,636 2,900 3,190 Trade and Other Receivables 2,776 3,010 3,315 4,190 4,517 Restricted Cash 2,178 2,876 3,020 3,171 3,330 Other Current Assets 762 235 258 284 312 Total Current Assets 22,908 36,224 54,091 69,180 84,791 Total Assets 28,507 45,171 63,744 79,494 95,785 Trade and Other Payables 9,263 16,847 31,036 43,268 57,004 Taxation Payable 1,760 1,940 2,037 2,139 2,245 Bank and Other Borrowings 2,463 6,713 7,270 7,723 8,206 Other Current Liabilities 2,258 2,550 2,805 3,086 3,394 Total Current Liabilities 15,744 28,049 43,148 56,214 70,850 Current assets less current liabilities 7,164 8,174 10,943 12,965 13,941 Total assets less current liabilities 12,763 17,122 20,596 23,280 24,936 Bank and Other Borrowings 3,289 5,284 6,341 6,975 7,673 US$ and RMB Bonds 4,269 4,243 6,475 7,079 7,741 Other Non-current Liabilities 473 577 631 863 936 Total Non-current Liabilities 8,031 10,105 13,447 14,918 16,350 Total Liabilities 23,776 38,154 56,596 71,132 87,199 Total Shareholders' Equity 4,648 5,178 5,196 6,205 6,205 Minority Interest 83 1,839 1,952 2,157 2,381 Total Equity 4,731 7,017 7,148 8,362 8,586 [Table_FinancialRatio] Financial Ratios 2016A 2017A 2018F 2019F 2020F Revenue Growth (%) 33.2 0.6 11.0 57.0 8.2 Gross Profit Growth (%) -16.2 8.7 18.7 59.1 10.0 Reported Net Profit Growth (%) 15.0 6.3 7.2 32.2 9.4 Underlying EPS Growth (%) 0.7-16.6 7.0 32.2 9.4 Gross Margin (%) 19.5 21.0 22.5 22.8 23.2 Operating Profit Margin (%) 11.8 11.9 13.5 13.8 14.3 Adjusted Net Margin (%) 7.6 6.3 6.7 6.1 6.3 ROA (%) 3.2 2.2 1.6 1.7 1.5 ROCE (%) 6.0 4.3 3.4 4.2 4.2 ROE (%) 15.8 14.4 14.6 17.6 17.6 Net Gearing Ratio 68.9 83.1 79.6 79.4 79.6 Debt to Equity Ratio 211.8 231.5 281.0 260.4 275.1 Current Ratio 145.5 129.1 125.4 123.1 119.7 Cash / Total Assets 16.1 16.7 17.8 15.0 14.1 Underlying P/E (x) 4.4 6.2 5.2 3.6 3.3 P/E (Basic) (x) 4.3 4.7 4.4 3.3 3.0 P/E (Diluted) (x) 4.3 4.7 4.4 3.3 3.0 P/B (x) 0.6 0.6 0.6 0.5 0.5 Dividend Yield (%) 4.8 3.9 4.3 5.7 6.6 See the last page for disclaimer Page 7 of 8

[Table_CompanyRatingDefinition] Company Rating Definition The Benchmark: Time Horizon: 6 to 18 months Rating Hong Kong Hang Seng Index Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable. [Table_IndustryRatingDefinition] Sector Rating Definition The Benchmark: Time Horizon: 6 to 18 months Rating Hong Kong Hang Seng Index Definition Outperform 跑赢大市 Relative Performance>5%; or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable. DISCLOSURE OF INTERESTS (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for GREENLAND BROAD (01253 HK),KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886 HK),GFI MSCI A I (03156 HK),CAM SCSMALLCAP (03157 HK),ZHENRO PPT (06158 HK),LINK HOLDINGS (08237 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. 2018GuotaiJunan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk See the last page for disclaimer Page 8 of 8