Strong growth outlook but valuation appears cheap; maintaining Buy
We maintain our Buy rating and raise our target price by 22% to HKD4.22 afterfactoring in YTD land acquisitions （2.4mn sqm GFA, equivalent to 26% of theend-2016 land bank） and stronger sales. We believe the current land bank willprovide a total of RMB142bn saleable resources to support 31%/30% salesgrowth in 2017/18F. With this and a gross margin expansion to 28-31%, weforecast a 26% earnings CAGR in the next three years. The stock trades at 4.7xFY18F P/E and a 51% discount to NAV （much cheaper than the sector averageof 7.3x P/E and 33% discount to NAV）。 We expect strong 1H17 results with>50% earnings growth, which would be a good near-term catalyst.
　　26% earnings CAGR in FY17-19F but valuation appears cheap; strong 1H17results would be a good near-term catalyst
We expect SCE to report a 26% earnings CAGR in the next three years, drivenby strong sales （+62%/+31% y-y in 2016/17F） and gross margin expansion to28-31% （vs. 25.0% in FY16）。 However, it is trading at only 4.7x FY18F P/E, 1.2xFY17F P/B and a 51% discount to NAV （much cheaper than the sector averageof 7.3x P/E, 1.5x P/B and a 33% discount to NAV）。 In particular, we believestrong 1H17F results （>50% earnings growth） will likely be a good near-termcatalyst for the share price.
　　Aggressive land acquisitions should support 30% sales growth in 2017-18F
The company acquired 2.4mn sqm land in 1H17 （vs. 1.7mn sqm GFA sold in2016）。 In particular, it entered/increased investments in several satellite cities ofT1/T2 cities （including Huizhou, Zhenjiang and Zhangzhou） to enjoy the spill-overdemand （which we estimate to have 10-15% net profit margins）。 We estimate itscurrent land bank provides total saleable resources of RMB142bn, which shouldsupport contracted sales growth at 31% to RMB30.9bn this year, and at another30% to RMB40.2bn in 2018F （even without further new land acquisitions），although its perpetual-adjusted net gearing may stay high at ~90%.
　　Valuation and risk
　　Our target price is based on a 45% discount to end-FY17F NAV of HKD7.68.The stock trades at 4.7x FY18F P/E （EPS: RMB0.71） and at a 51% discount toNAV. The implied dividend yield is 5-7% （based on a 30% payout ratio） inFY17-19F. Key risks include weaker-than-expected sales growth, a slowermargin recovery, and higher net gearing due to unwise land acquisitions.