Event
　　According to Auyuan’s announcement, in May 2020, the company reached monthly contracted salesamount and area of 10.25 Bn yuan and 1.015 Mn sq.m, up 2.3% and 0.7% YoY, and up 17.4% and17.9% MoM. From January to May, the company's accumulated contracted sales amount and areareached 33.28 Bn yuan and 3.252 Mn sq.m, down 13.2% and 14.3% YoY. The average selling pricefrom January to May was 10,232 yuan/sq.m.
　　Highlights
　　Our comments: The company's 2020 sales target is 132.2 Bn yuan, up 12% YoY. It’s expected that salesgrowth will start to accelerate again in 2021, and the sales CAGR will be about 20% in the next 3years. In 2020H2, the company will increase its efforts to push forward sales, and the negative growthof sales amount is expected to gradually narrow and turn positive. The company has diversified landacquisition channels, experiences in M&A, controllable average land cost and abundant urbanrenewal resources. We expect the company's revenues in 2020/2021 to be 82.0/102.2 Bn yuan, up62.2%/24.8% YoY. The core net profits will be 6.3/7.7 Bn yuan, up 52.3%/23.0% YoY. The currentdividend yield is 7.0%. We maintain ‘Buy’, TP HKD 13.50, which corresponds to a 5x/4x PE in2020/2021, a 35% NAV discount and 55% upside potential.
　　Sales growth will accelerate in 2020H2: In May 2020, the company reached monthly contracted salesamount and area of 10.3 Bn yuan and 1.02 Mn sq.m, up 2% and 1% YoY. It is the first time for bothYoY growth rates to be positive this year. The negative accumulated sales growth has continued tonarrow down since February. As of May, the company's accumulated contracted sales amount andarea reached 33.3 Bn yuan and 3.25 Mn sq.m, down 13% and 14% YoY, 6% narrower than YoY growthrate in the previous month and 20% narrower than that in February. The average selling price fromJanuary to May was 10,232 yuan/sq.m, up 1% YoY. The company has completed 25% of the annualsales target, and the accumulated sales amount is expected to surpass that of last year in 2020H2.
　　Maintain attributable interest and keep advantage in M&A: From January to April 2020, the companyadded 27 land projects with GFA of 3.5 Mn sq.m. The attributable interest continued to maintain at ahigh level of more than 70%. The total attributable land consideration was 10 Bn yuan, and theaverage land cost is about 3,570 yuan/sq.m. In addition, the company signed agreement on April 7 toacquire 29.99% shares of Kinghand Industrial with a total cost of 1.16 Bn yuan. Kinghand IndustrialInvestment Company, an A-share listed company (000615.SZ), has land bank with about 1.2 Mn sq.mof saleable GFA. The acquisition cost is relatively low, and the land bank rapidly expanded through theacquisition. The residential properties of Kinghand are mainly concentrated in Beijing and Langfang,so the acquisition also helped the company further expand land bank in the Beijing-Tianjin-HebeiRegion.
　　Deeply cultivate GBA; Has Layout in both China & overseas: In terms of regional distribution, thecompany continues to deeply cultivate GBA. Guangdong accounts for 42% of newly-added GFA.
　　Anhui, Jiangsu, Guangxi, Shaanxi, Hubei, Hebei, Australia and Yunnan accounts for 17%, 10%, 9%, 8%,7%, 4%, 2%, 1%, respectively. In terms of land acquisition methods, M&A accounts for 81% ofnewly-added GFA.
　　Risks: 1) Macroeconomic growth slows down. 2) Stricter industry regulation and policies. 3)Tighter liquidity. 4) Contracted sales below expectation. 5) RMB depreciation. 6) Urbanrenewal projects proceed below expectation.
　　This English translation of the original Chinese version <下半年销售集中发力> issued byIndustrial Securities on 2020.6.4 is for information purpose only. In case of a discrepancy, theChinese original will prevail.