TP raised to HKD6.61, reiterating top pick
We raise our TP to HKD6.61 on the back of: 1） 2017 sales beat and 13%increase to our 2018 sales forecast to RMB180bn （+43% y-y）； 2） new landacquisitions over the past month; and 3） higher earnings estimates due tostronger sales forecast （6-14% higher than previous estimates for FY17-19）。 Wereiterate Future Land as one of our top picks in view of its cheap valuation at6.1x FY18F P/E, 4.5x FY19F P/E and 56% discount to NAV, and strongexecution with 104% y-y sales growth in 2016 and 94% y-y in 2017. In ourview, the company will become a top-10 player in 2018F in terms of grossproperty sales, and hence, deserves a further valuation re-rating.
Land acquisition on good progress, >RMB600bn saleable resources on hand
The company acquired 23.7m sqm GFA in 11M17 to boost its total saleableresources to >RMB600bn by end-2017, which is one of the highest amongsmall/mid-cap developers in China. These landbanks are mainly in the YRDarea （~70% in terms of GAV）， which is one of the most wealthy areas in China.
Leveraging its shopping mall operation and brand name （Injoy Plaza 吾悦广场），Future Land has acquired relatively cheaper landbank than peers in 2017 and,therefore, can likely ensure its blended gross margin to sustain at high-20%even using current property prices.
Strong sales in 2017 and we raise our 2018 sales and earnings estimates
Future Land achieved RMB126bn contracted sales in 2017 （based on CRICdata）， implying 94% y-y growth. With abundant saleable resources of morethan RMB600bn by end-2017, we raise our 2018F sales forecast by 13% toRMB180bn, implying another 43% y-y growth. In addition, with better-thanexpected2017 sales, we raise our 2018F earnings by 13% to RMB4.1bn, whichmakes it one of the cheapest names under our coverage.
Valuation and risk
Our TP of HKD6.61 is based on a 45% discount to our end-2018F NAV ofHKD12.01. The stock now trades at 6.1x FY18F P/E and a 56% discount toNAV. Key downside risks are higher net gearing due to aggressivelandbanking, and slower-than-expected sales growth and margin recovery.