Modern Land's revenue is expected to grow fast. During Jan.-May 2016,Modern Land recorded RMB5,414.86 mn in contracted sales, up 53.1% YoY.
　　Given sufficient salable resources of RMB24.7 bn under the property marketrecovery, we expect contracted sales to extend strong growth.
　　We expect Modern Land's margins to remain stable. The Company'sgross margins are expected to remain at around 31.5% between 2016 and2018 due to its quality land bank and updated energy-saving and heatingand cooling systems. We also expect funding costs to decline further.
　　Modern Land's 2015 underlying net profit missed our expectation by 13.9%on below-expectation gross margin. Total revenue increased 55.7% YoY toRMB6,350 mn in 2015. The underlying net profit grew 25.9% YoY toRMB545 mn. We revise up the underlying net profit by 1.7% and 16.4%to RMB780 mn and RMB1,023 mn in 2016 and 2017, respectively.
　　Maintain “Buy”。 The Company's valuation remains low. Therefore, wemaintain the target price of HK$2.26, which represents a 35% discount to2016E NAV of HK$3.47 per share and implies 5.1x 2016 underlying PER and1.0x 2016 PBR. We maintain our investment rating as “Buy”。