According to the Annual Report of 2007, the annual revenue was 1.306 billion yuan, an increase of 181.11 percent yoy; net profit attributable to the parent company: 152 million yuan, an increase of 67.69 percent yoy; basic EPS: 0.67 yuan. Distribution plan: 2 yuan (before tax) cash dividend, 2.5 shares bonus and 7.5 shares converted for each 10 shares.
The substantial increase in revenue came from the strong growth of housing sales of the four projects such as Hangzhou Xicheng Nianhua. Among them, Xicheng Nianhua Project contributed to the revenue 677 million yuan which accounted for about 52 percent of the revenue.
The Market was positioned in the second and third line cities and products were positioned at small and medium-sized common residential houses. Land reserves were adequate. New equity construction area and land area were 453,300 and 661,400 square meters respectively in 2007 and at the end of 2007, equity construction area and land area reached 1.1641 million and 1.4384 million square meters, which provided the basic guarantee for the company’s development in the next few years.
Profit forecast and rating. Without equity changes taken into account, we predict EPS in 08E and 09E will be 1.13 yuan and 1.47 yuan respectively. Seeing its regional competitive advantages and reasonable market and product positioning as well as the confirmed growth of earnings in the next two years, "overweight" rating is reiterated.
Risks: financing risks, price decline in regional real estate market such as Hangzhou, lifting of the ban of non-tradable shares, financial cost increase due to interest rate lifting and market competition of land.