Maintaining Buy with target price lifted to HKD4.41
We maintain our Buy rating, lift FY17-19F earnings by 1-7%, and raise ourtarget price by 5% to HKD4.41 after factoring in stronger sales, better margin,and 1H17 results. We believe SCE has accumulated sufficient saleableresources （~RMB150bn in the interim period, 65% of T1/T2 cities by GAV） andis well poised to boost sales at a 33% CAGR over the next two years. Coupledwith margin expansion to 30-31% （vs. 25.0% in FY16）， we expect earnings togrow +28%/+44% yoy in FY17/18F. The stock now only trades at 4.4x FY18FP/E and 53% discount to NAV, but offers 5-8% dividend yields （vs. the sectoraverage of 6.8x P/E, a 38% discount to NAV and 4-5% dividend yields）。
　　Becoming more aggressive in scale expansion
Management is becoming more aggressive in scale expansion and targets~RMB40bn sales in 2018F （implying a 30% CAGR） via proactive land banking（it acquired ~5mn sqm GFA in 8M17, vs. 1.7mn sqm GFA sold in FY16）。 Webelieve its land bank as of 1H17 can provide total saleable resources of~RMB150bn, which should be able to support 33%/34% sales growth toRMB31.3bn/42.0bn in 2017/18F, even without further land acquisitions.
　　30% earnings CAGR, 5-8% dividend yield; but net gearing could stay high
We expect SCE to deliver a ~30% earnings CAGR in FY17-19F, considering itsstrong sales and gross margin expansion to 30-31% （vs. 25.0% in FY16）。
　　Management is committed to maintaining at least a 30% payout, translatinginto 5-8% dividend yields in the next three years, based on our estimates,although perpetual-adjusted net gearing could stay high at ~95% due toproactive land banking for scale expansion.
　　Strong results amid margin expansion
　　In line with the earlier positive results alert, SCE has reported strong 1H17results: 1） revenue rose 41% to RMB8.2bn, 2） gross margin expanded to 30.7%（vs. 25.0% in FY16）， 3） core profits rose 106% to RMB939mn, and 4） perpetualadjustednet gearing improved slightly to 91% （vs. 95% in FY16）。 SCE declaredan interim dividend of HKD6 cents/share.
　　Valuation and risks
　　Our target price is based on a 45% discount to end-FY17F NAV of HKD8.02.
　　The stock trades at 4.4x FY18F P/E （EPS: RMB0.74） and at a 53% discount toNAV. Key risks include weaker-than-expected sales growth, a slower marginrecovery, and higher net gearing due to unwise land acquisitions 。