Revenue and net profit gained by 14.1% to RMB64.6bn and 3.1% to RMB5.27bnin 1H20, respectively. Spin-off of Shimao Services is on the way and expected tobe completed this year. We raise TP to HK$44.94. Maintain BUY.
　　Interim core profit gained 5%. Revenue and net profit gained by 14.1% toRMB64.6bn and 3.1% to RMB5.27bn in 1H20, respectively. Top-line growthwas driven by 16.6% increase of delivery GFA to 3.95mn sq m. However,net finance cost increased 3.2x to RMB714mn in 1H20 due to FX loss. Coreearnings increased by 4.7% to RMB5.56bn in the period. Interim dividendincreased from HK$0.6 in 1H19 to HK$0.7 (including special dividendHK$0.1) in 1H20.
　　New business model of “Giant Aircraft Strategy”. Diversification wouldenhance return and reduce risk. Shimao kicked off a “Giant Aircraft Strategy”
　　business model in 2020. Property development business is main body,commercial properties operation, hotel operation, property management andfinance are solid wings while investments in advanced technology, medicaltreatment, education, elderly care and culture are key empennage. TheCompany introduced two investors to Shimao Services and recordedRMB600mn gain for existing shares sales. Then, HK$0.1 special dividend wasdeclared in the period.
　　Contracted sales up 10% in 1H20. Contracted sales upped 10.1% toRMB110.5bn in 1H20. Shimao will launch RMB400bn properties for sales in2H20 in order to accomplish its RMB300bn sales target in 2020. In 1H20,Shimao acquired 12.32mn sq m land bank. As of Jun 2020, total attributableland bank amounted to 51.86mn sq m in 423 projects in 135 cities.
　　Shimao Services on listing application. Shimao Services filed A1application proof for IPO on HKEx in Jun 2020. According to China IndexAcademy, Shimao Services was ranked 12th in 2019. As of 20 Jun 2020,contracted GFA was 124.4mn sq m covering 495 properties projects. Weexpect listing will be completed in 2020 and create value to shareholders.
　　Raise TP to HK$41.94. Net gearing ratio stood comfortable level of 57.8%as at Jun 2020. Looking forward, Shimao aims at 20-30% sales growth and20%+ core earnings growth in 2020-24. This would be an encouraging signal.
　　We raise end-20 NAV forecast from HK$50.46 to HKR59.92 after new landbank and raise Shimao Services valuation to HK$25bn. As a result, we raiseTP from HK$37.85 to HK$44.94, representing. 25% discount to NAV.