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研 Jack Liu 柳晨 Company[Table_Title Report:] Aoyuan (03883 HK) 究 (852) 2509 2149

EquityR 公司报告： 中国奥园 (03883 HK) [email protected] 26 November 2019 Steady[Table_Summary Growth] Prospect, "Buy"

稳健的增长预期，“买入”

 Contracted sales is likely to extend its uptrend in 4Q2019. In Jan.-Oct. 2019, 公 [Table_Rank] accumulated contracted sales grew by 31.2% YoY and reached RMB88.62 bn, Rating: Buy

司 achieving 77.7% of the Company’s 2019 sales target. Saleable resources in 2H19 is expected to reach around RMB130 bn, indicating a sell-through rate of 报 评级： 买入 approximately 60% to complete the 2019 sales target. With competitive products 告 across an agglomeration of key urban areas in China and low target sell-through

Company Report Company rate, we believe that the Company’s 2019 sales target is achievable. 6[Table_Price]-18m TP 目标价 : HK$13.92

 Abundant land bank with low unit land cost is expected to support the Company’s business expansion. As at 30 Jun. 2019, the Company had a total Share price 股价: HK$11.220

land bank GFA of approximately 40.12 million sq.m (attributable: 81%) with an

average unit land cost of RMB2,321 per sq.m, representing only 23.0% of ASP in

1H19. Land bank in GBA accounted for 18.8% of its total land bank GFA. Stock performance 证 股价表现  1H19 underlying net profit surged by 86.6% YoY to RMB2,073 mn. The [Table_QuotePic180.0 ] 券 Company’s 1H19 top line soared by 73.2% YoY to RMB23,670 mn in 1H19, % of return 160.0

研 mainly due to increase in both GFA and ASP of the delivered projects. We 140.0

expect underlying net profit in 2019-2021 to reach RMB4,083 mn, RMB6,181 mn 究 120.0 and RMB7,249 mn, respectively. 100.0 报 80.0  The Company has accumulated unbooked revenue of RMB139.0 bn as a result 60.0

告 of robust contracted sales growth in 2016-2019. The unbooked revenue is 40.0 EquityResearch Report expected to be recognized in the next two years, indicating a steady growth 20.0

prospect. We set our target price at HK$13.92, representing a 50% discount to 0.0

2019E NAV of HK$27.85 per share, 8.2x 2019 underlying PER and 2.2x 2019 (20.0) Nov-18 Feb-19 May-19 Aug-19 Nov-19 PBR. Investment rating is "Buy". Risk factors: lower-than-expected contracted sales, uncertainties of overseas projects and redevelopment projects. HSI Index China Aoyuan

 2019 年 4 季度合约销售预计将延续上升势头。2019 年 1 至 10 月合约销售同比增长 31.2%至 [Table_PriceChange] 人民币 886.2 亿元，相当于公司 2019 年全年销售目标的 77.7%。2019 年下半年可售资源将 Change in Share Price 1 M 3 M 1 Y 达到约人民币 1,300 亿元，相当于约 60%的去化率即可完成全年的销售目标。基于覆盖中国 股价变动 1 个月 3 个月 1 年

Abs. % 房 重点城市群的优质产品和较低的目标去化率，我们认为公司可以完成其 年销售目标。 8.9 8.9 134.7 2019 绝对变动 %

告 Rel. % to HS Index 7.7 3.9 132.4 地  大量的土地储备与较低的单位土地成本将支撑公司的业务扩张。截至 2019 年 6 月 30 日，公 相对恒指变动 %

Avg. Share price(HK$)

报 司土储总建面达到 万平米（权益比率： ），单位土地成本为每平米人民币 产 4,012 81% 2,321 10.9 9.9 8.4

平均股价（港元） 元，仅相当于公司 2019 年上半年销售均价的 23.0%。大湾区土储占到了总土储建面的 18.8%。 Source: Bloomberg, Guotai Junan International. 行 究

 2019 年上半年核心净利同比上升 86.6%至人民币 20.73 亿元。由于交付建面和交付项目的销 Property Sector

业 研

售均价上升，公司 2019 年上半年收入同比上升 73.2%至人民币 236.7 亿元。我们预计 2019

至 2021 年核心净利将分别达到人民币 40.83 亿元，人民币 61.81 亿元和人民币 72.49 亿元。

券

 公司受益于 2016-2019 年强劲的合约销售增长，已经累积了约人民币 1,390 亿元的已售未结 证 收入。这些未结转收入预计将于未来两年内结转，显示了较为稳健的增长预期。我们给予公司 13.92 港元的目标价，相较于公司 2019 年每股估值 27.85 港元有 50%的折让，也分别相当于

倍 年核心市盈率及 倍 年市净率。投资评级为 买入 。风险：低于预期的合

8.2 2019 2.2 2019 “ ” 约销售，海外项目和旧改项目存在不确定性。

Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结Profit] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率

12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%) 2017A 19,115 1,640 0.613 89.8 15.2 3.794 2.5 0.250 2.7 17.2

中 2018A 31,006 2,409 0.899 46.7 10.9 4.433 2.2 0.360 3.7 21.9

2019F告 52,577 4,324 1.614 79.5 6.2 5.754 1.7 0.643 6.4 31.6

国

2020F 82,151 6,478 2.418 49.8 4.2 7.800 1.3 0.964 9.6 35.5

报

奥 2021F 98,392 7,607 2.839 17.4 3.5 10.248 1.0 1.132 11.3 31.3

园 Shares究 in issue (m) 总股数 (m) 2,690.4 Major shareholder 大股东 Guo Ziwen 55.2%

[Table_BaseData]

Market cap. (HK$ m) 市值 (HK$ m) 30,078.7 Free float (%) 自由流通比率 (%) 44.8 研

3 month average vol. 3 个月平均成交股数 (‘000) 9,478.5 FY19 Net gearing (%) FY19 净负债/股东资金(%) 146.7 券

China Aoyuan (03883Aoyuan HK) China 52 Weeks high/low (HK$) 52 周高/低 (HK$) 12.140 / 4.510 FY19 Est. NAV (HK$) FY19 每股估值（港元） 27.8

Source: the Company, Guotai Junan International. 证

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[Table_PageHeader]China Aoyuan (03883 HK)

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Housing sales growth slightly recovered in Jun.-Oct. 2019 and is likely to maintain its uptrend in Nov.-Dec. 2019. During Jan.-Oct. 2019, commodity housing sales amount and GFA recorded mild recovery, with decline in growth rate only in May.

2019 and Jun. 2019. During the first 10 months in 2019, cumulative commodity house sales amount grew by 7.3% YoY, while cumulative commodity house sales GFA increased by 0.1% YoY. We expect housing sales to continue to grow for the rest of 2019, given that developers have started to accelerate contracted sales in order to accomplish the full-year sales target. Housing sales in lower-tier cites is expected to face more challenges because property sales in lower-tier cities benefited from a large number of shantytown redevelopment programs in the past. In aggregate, we are likely to see some recovery in

commodity housing sales. 26 November2019

Figure 1: Cumulative House Sales Amount in China Figure 2: Cumulative House Sales GFA in China

16,000 50.0% 2,000 35.0% 14,000 45.0% 1,800 30.0% 40.0% 1,600 12,000 25.0% 35.0% 1,400 20.0% 10,000 30.0% 1,200 15.0% 8,000 25.0% 1,000 10.0% 6,000 20.0% 800 15.0% 600 5.0% 4,000 10.0% 400 0.0% 2,000 5.0% 200 -5.0%

0 0.0% 0 -10.0%

Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Oct-16

Apr-17 Oct-17 Apr-18 Apr-19 Oct-19 Oct-16 Oct-18

Jun-16 Jun-17 Jun-18 Jun-19

Jun-17 Jun-19 Jun-16 Jun-18

Feb-17 Feb-18 Feb-19

Feb-17 Feb-18 Feb-19

Aug-16 Dec-16 Aug-17 Dec-17 Aug-18 Aug-19 Dec-18

Dec-16 Aug-17 Dec-17 Dec-18 Aug-19 Aug-16 Aug-18

] 2 r a M t h g i R _ e l b a T [ Amount Sold of Commodity Houses (LHS)(RMB bn) GFA Sold of Commodity Houses (LHS) (sq.m. mn) Amount Sold of Residential Houses (LHS) (RMB bn) GFA Sold of Residential Houses (LHS) (sq.m. mn) Amount Sold YTD YoY of Commodity Houses (RHS) GFA Sold of Commodity Houses YTD YoY (RHS) Amount Sold YTD YoY of Residential Houses (RHS) GFA Sold of Residential Houses YTD YoY (RHS) Source: National Bureau of Statistics of China, Guotai Junan International. Source: National Bureau of Statistics of China, Guotai Junan International.

Targeted and tightening policies will be maintained but monetary environment has started to become moderately loose with the recent decline in loan rate. Targeted policies will be maintained to promote the steady and sound development of the property sector. Both CPC political bureau meetings held in Apr. 2019 and Jul. 2019 reaffirmed that: 1) houses should be used for accommodation only and not for investment; 2) local governments must be responsible for the long-term regulation and control of local property markets; 3) local property market policies should be formulated and implemented on a city-by-city basis.

In Sep. 2019, the PBOC announced an RRR cut. The PBOC also announced that monthly loan prime rates (LPR) will act as the (03883 HK) guidance for personal housing mortgage rate from 8 Oct. 2019. In Nov. 2019, the 1-year MLF rate declined by 5 bps to 3.25% and the latest 5-year LPR also dropped by 5 bps to 4.80%, indicating a moderately loose monetary environment. We believe it is

possible that commercial banks could offer loan products with lower interest rates to both house buyers and developers, thus 中国奥园 benefiting the whole real-estate industry.

Figure 3: Key Property Development and Sales Data

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30.0% China Aoyuan 22.5% 15.8% 20.0% 17.2% 14.2% 10.3% 8.1% 7.0% 7.7% 9.5% 10.0% 10.5% 10.1% 10.0% 6.5% 6.9% 1.3% 1.0% 7.0% 0.1% 0.3% 0.0% 2015 2016 2017 2018 Jan.-Oct.2019 2019F -10.0% -3.4% -14.0% -15.3% -20.0% -16.3%

-30.0% -31.7% -40.0%

GFA Newly Started YTD YoY Land Area Sold YTD YoY Investment YTD YoY GFA Sold of Commodity Houses

Source: National Bureau of Statistics of China, Guotai Junan International.

China Aoyuan’s contracted sales growth in Oct. 2019 accelerated and is likely to stay on the uptrend for the rest of 2019. The Company’s contracted sales in Oct. 2019 surged by 54.5% YoY to RMB10.03 bn, which is the highest monthly growth rate in 2019. During Jan.-Oct. 2019, accumulated contracted sales grew by 31.2% YoY and reached RMB88.62 bn, achieving 77.7% of

the Company’s 2019 sales target of RMB114.1 bn. Contracted GFA during Jan.-Oct. 2019 amounted to 8.797 mn sq.m, up by

37.0% YoY. The ASP in Jan.-Oct. 2019 was RMB10,073 per sq.m, down by 4.3% YoY. Saleable resources in 2H19 is expected to Company Report reach around RMB130 bn, indicating a sell-through rate of approximately 60% to complete the 2019 sales target. With See the last page for disclaimer Page 2 of 9 [Table_PageHeader]China Aoyuan (03883 HK)

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competitive products across an agglomeration of key urban areas in China and low target sale-through rate, we believe that the Company’s 2019 sales target is achievable. As at 30 June 2019, the Company’s unbooked revenue reached approximately

RMB139 bn and is expected to be recognized in the next 2 years, indicating a steady growth prospect.

Figure 4: The Company’s Contracted Sales Amount Figure 5: The Company’s Monthly Contracted Sales

RMB billion RMB/sq.m. 20 RMB billion RMB / sq.m 14,000 100 16,000 91.28 88.62 12,000 14,000 16 80 12,000 10,000 10,158 10,300 10,073 26 November2019 9,103 8,591 10,000 12 8,000 60 8,037 45.59 8,000 8 6,000 40 6,000 25.60 4,000 4,000 4 20 12.22 15.17 2,000 2,000 0 0 0 0 2014A 2015A 2016A 2017A 2018A Jan.-Oct. 2019 Contracted Sales Amount (LHS) Accumulated ASP (RHS) Monthly Contracted Sales (LHS) Monthly ASP (RHS)

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [ Figure 6: China Aoyuan’s Recognized Sales Amount Figure 7: China Aoyuan’s Contracted Sales Amount Breakdown by Region in 1H19 Breakdown by Region in 1H19

Offshore, Offshore, 7.0% 2.0% Bohai Bohai Rim, Rim, East 3.0% 10.0% China, East South 15.0% China, China, Core region of 19.0% 42.0%

Central &

Western China, South 7.0% China, Core region of 68.0% Central & Western China,

27.0% (03883 HK)

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. 中国奥园 China Aoyuan’s (the "Company") 1H19 net profit surged by 86.8% YoY. The Company’s top line soared by 73.2% YoY to RMB23,670 mn in 1H19. Revenue from property development business grew by 73.1% YoY to RMB22,421 mn, which accounted

for 94.7% of the Company’s total revenue. During 1H19, GFA delivered increased by 26.1%] YoY2 r toa 2.08M t h mng sq.mi R ,_ whilee l b thea T [

China Aoyuan exclusive-tax ASP of recognised property sales grew by 37.1% YoY to RMB10,785 per sq.m. Gross profit amounted to RMB7,046 mn, up 80.6% YoY. The Company’s shareholders’ net profit surged by 86.8% YoY to RMB2,272 mn. Excluding post-tax fair value gains on investment properties, exchange losses and other non-recurring items, underlying net profit increased by 86.6% YoY to RMB2,073 mn. GPM increased by 1.2 ppts YoY to 29.8%. Net profit margin also increased by 0.7 ppts YoY to 9.6%. No interim dividend was declared by the Company in 1H19.

Table 1: Comparison of the Company’s Income Statement in 1H18 and 1H19 RMB mn 1H18 1H19 Change Total revenue 13,667 23,670 73.2% - Property development 12,950 22,421 73.1%

- Property investment 53 88 65.9% - Hotel operation and others 663 1,160 75.0%

Gross profit 3,902 7,046 80.6% GPM 28.6% 29.8% 1.2 ppts Shareholders’ net profit 1,216 2,272 86.8%

Underlying shareholders’ net profit 1,111 2,073 86.6%

Shareholders’ NPM 8.9% 9.6% 0.7 ppts Company Report Underlying Shareholders’ NPM 8.1% 8.8% 0.6 ppts

See the last page for disclaimer Page 3 of 9 [Table_PageHeader]China Aoyuan (03883 HK)

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DPS (RMB) N.A. N.A. N.A. Underlying EPS (RMB) 0.415 0.774 86.7% Source: the Company, Guotai Junan International.

Table 2: Comparison of the Company’s Balance Sheet as at the end of 2018 and 1H19 RMB mn 2018 1H19 Change Cash and cash equivalents 32,937 40,862 24.1% Total asset 188,858 232,568 23.1% Properties under development 101,180 116,839 15.5% 26 November2019 Completed properties 13,714 18,859 37.5% Contract liabilities 59,966 68,605 14.4% Total debt 57,722 77,556 34.4% Shareholders' equity 11,872 13,397 12.8% Net debt / Total equity 58.9% 64.2% 5.3 ppts Net debt / Shareholders’ equity 152.5% 169.6% 17.7 ppts Source: the Company, Guotai Junan International.

Disciplined land replenishment initiatives with strong M&A and redevelopment capability could sustain the Company’s

contracted sales growth. During 1H19, the Company acquired 34 projects with newly added] 2 r a GFAM t ofh 7.26g i R million_ e l sq.mb a T [

(attributable: 78%). Tier-1 and tier-2, plus satellite cities, accounted for 65% of newly acquired projects in terms of GFA, while tier-3 and tier-4 accounted for 35%. This will provide enough saleable resources to support contracted sales growth. As for land acquisition channels, land acquired from M&A, public land auction and urban redevelopment accounted for 72%, 25% and 3% of total GFA acquired in 1H19, respectively. In addition, China Aoyuan has over 30 urban redevelopment projects with total planned GFA of approximately 16.04 mn sq.m.

Abundant land bank with low unit land cost is expected to support the Company’s business expansion. As at 30 Jun.

2019, the Company had a total land bank GFA of approximately 40.12 million sq.m (attributable: 81%) with an average unit land cost of RMB2,321 per sq.m, representing only 23.0% of ASP in 1H19. We have noticed that the Company’s unit land cost

increased from RMB2,102 per sq.m in 2018 to RMB2,321 per sq.m in 1H19, while ASP slightly decreased from RMB10,300 per (03883 HK) sq.m in 2018 to RMB10,080 per sq.m in 1H19. As at the end of 1H19, China Aoyuan land bank in Greater Bay Area (“GBA”) amounted to 7.56 mn sq.m., representing 18.8% of its total land bank. We expect abundant land bank with low unit land cost to

support the Company’s business expansion. We also expect relatively stable ASP and gradually rising unit land costs to bring 中国奥园 some downside pressure on the GPM of the Company’s future projects.

Figure 8: China Aoyuan’s Land Exposure by type in 1H19 Figure 9: China Aoyuan’s Land Exposure Value by Region in 1H19

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China Aoyuan Investment properties, Offshore, 2.0% 5.0%

Commercial Auxilliary Bohai properties, facilities, Rim, 16.0% 12.0% 2.0% South East China, China, 45.0% 16.0%

Residential Core region of properties, Central & 80.0% Western China, 22.0%

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Company Report

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Net gearing is expected to be maintained at healthy levels. The Company’s net gearing ratio in 1H19 declined by 3.3 ppts YoY to 64.2%. Average borrowing costs remained at 7.4% in 1H19, which is at a historical low level since 2013. China Aoyuan’s

credit rating outlook was upgraded by Moody’s and S&P to positive performance in 1H19; we expect average borrowing costs to remain stable. The Company’s diversified financing channels mainly include bank borrowings, offshore senior notes and offshore corporate bonds, while trust loans only accounted for 5% of its total debt. With forecasted steady growth in contracted sales and disciplined land replenishment initiatives, we believe that net gearing ratios would remain at healthy levels in 2019-2021.

Figure 10: China Aoyuan’s Total Debt and Funding Costs Figure 11: China Aoyuan’s Debt Structure in 1H19 26 November2019

RMB mn 90,000 12% 10.2% 77,556 80,000 9.5% 10% 70,000 8.1% Offshore 57,722 7.4% 60,000 7.2% 8% senior notes, 23% 50,000 7.4% 40,370 6% 40,000 Onshore 30,000 4% Onshore bank 16,298 18,380 corporate borrowings, 20,000 11,497 2% bonds, 8% 52% 10,000 Offshore 0 0% 2014A 2015A 2016A 2017A 2018A 1H2019 bank borrowings Trust

, 12% loans] ,2 r a M t h g i R _ e l b a T [ Total debt (LHS) Average funding costs (RHS) 5%

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

We set the Company’s target price at HK$13.92 and investment rating as "Buy". China Aoyuan’s contracted sales growth accelerated in Oct. 2019 and is likely to stay on the uptrend for the rest of 2019. The Company’s has accumulated unbooked revenue of RMB139.0 bn, resulting from robust contracted sales growth in 2016-2019. The unbooked revenue is expected to is recognized in the next two years, indicating a steady growth prospect. After years of development, China Aoyuan became eligible for listing on the -Hong Kong Stock Connect in September 2019 and was added into the Hang Seng Composite LargeCap & MidCap Index in August 2019, respectively. With competitive products across an agglomeration of key urban areas

in China and low target sell-through rate, we believe that the Company’s 2019 sales target is achievable. Net Gearing ratios are (03883 HK) expected to be maintained at healthy levels, riding on steady growth in contracted sales and disciplined land replenishment initiatives. Gross margin was under downside pressure due to rising unit land costs and stringent ASP restrictions. Thus, we set

our target price to HK$13.92, representing a 50% discount to 2019E NAV of HK$27.85 per share, 8.2x 2019 underlying PER and 中国奥园 2.2x 2019 PBR. We set China Aoyuan's investment rating as "Buy". Risk factors include lower-than-expected contracted sales and uncertainties in overseas operations and redevelopment projects.

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Table 3: Breakdown of China Aoyuan’s 2019 NAV China Aoyuan Asset value Asset Value NAV/share (RMB m) (HK$ m) (HK$) % of NAV % of GAV Development properties 85,269 94,744 35.22 126.5% 94.6% Investment properties 2,415 2,683 1.00 3.6% 2.7% Aoyuan Healthy Life * 2,454 2,726 1.01 3.6% 2.7% Gross asset value 90,138 100,153 37.23 133.7% 100.0% (Net debt)/Net cash (22,710) (25,234) (9.38) (33.7%) NAV 67,428 74,919 27.85 100.0% NAV/Share 25.06 27.85 Source: the Company, Guotai Junan International. Note *: The Company holds 54.58% of the interest in Aoyuan Healthy Life Group Company Limited (03662.HK).

Company Report

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Figure 12: The Company’s Historical P/E Ratio Figure 13: The Company's Historical P/B Ratio

12 2.4

10 +1SD: 8.8x 2.0

8 Average: 6.8x 1.6 +1SD: 1.7x 6 1.2 Average: 1.2x 4 -1SD: 4.8x 0.8

2 0.4 -1SD: 0.7x 26 November2019

0 0.0

P/E Average 1SD -1SD P/B Average 1SD -1SD

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

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(03883 HK)

中国奥园

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China Aoyuan

Company Report

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Table 4: Peers Comparison

Company Stock Code Currency Mkt Cap (HK$ m) PE PB ROE(%) D/Y(%)

2018A 2019F 2020F 2021F 2018A 2019F 2020F 2021F 2019F 2019F

HK listed large developers with major revenue from Co Ltd-H 02202 HK HKD 357,472 8.3 7.4 6.4 5.6 1.9 1.6 1.4 1.2 23.0 4.6 China Overseas Land & Invest 00688 HK HKD 296,365 6.6 6.6 5.6 5.1 1.0 0.9 0.8 0.7 14.9 4.2 China 03333 HK HKD 255,015 5.7 5.2 4.8 4.3 1.7 1.4 1.2 1.0 30.4 11.2 Holdings Co 02007 HK HKD 246,408 5.9 5.4 4.7 4.1 1.8 1.4 1.2 1.0 29.4 5.9 Ltd 01109 HK HKD 250,296 8.5 9.4 8.1 6.9 1.5 1.4 1.2 1.1 16.2 3.8

Longfor Group Holdings Ltd 00960 HK HKD 197,084 10.0 10.7 8.9 7.3 2.1 1.9 1.7 1.5 18.8 4.1 26 November2019 China Holdings Ltd 01918 HK HKD 168,146 8.4 5.8 4.6 3.9 2.6 1.9 1.4 1.1 36.2 3.6 Holdings Ltd 00813 HK HKD 94,588 9.1 7.7 6.2 5.1 1.4 1.2 1.1 1.0 16.9 5.1 Logan Property Holdings Co L 03380 HK HKD 65,560 6.8 6.0 4.8 4.0 2.1 1.7 1.4 1.1 30.3 7.0 Holdings Group 00817 HK HKD 63,286 10.0 8.7 6.8 5.3 1.5 1.4 1.2 1.1 15.5 4.9 Cifi Holdings Group Co Ltd 00884 HK HKD 46,147 7.0 5.8 4.7 3.5 1.6 1.3 1.1 0.9 23.0 6.2 Agile Group Holdings Ltd 03383 HK HKD 43,871 5.1 5.2 4.5 3.9 0.9 0.8 0.7 0.7 15.5 9.3 R&F Properties - H 02777 HK HKD 44,533 4.5 3.3 2.8 2.4 0.6 0.5 0.5 0.4 17.2 12.3 Ltd 03883 HK HKD 30,078 10.5 6.3 4.4 3.3 2.2 1.8 1.4 1.1 31.5 6.3 Times China Holdings Ltd 01233 HK HKD 30,564 5.5 5.1 4.1 3.3 1.5 1.2 0.9 0.7 26.8 5.7 Shenzhen Investment Ltd 00604 HK HKD 27,384 7.4 7.4 6.8 6.1 0.6 0.6 0.5 0.5 8.1 5.8 Co Ltd 00123 HK HKD 26,010 6.4 6.9 6.1 5.7 0.5 0.6 0.6 0.6 8.2 5.7 Kwg Group Holdings Ltd 01813 HK HKD 27,494 5.7 4.8 3.9 3.2 0.8 0.7 0.7 0.6 16.5 8.1

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Midea Real Estate Holding Lt 03990 HK HKD 23,383 5.4 4.7 3.6 2.8 1.3 1.1 0.9 0.7 24.6 8.4 Sino-Ocean Group Holding Ltd 03377 HK HKD 22,011 5.2 5.4 3.6 3.4 0.4 0.4 0.4 0.3 6.8 8.4 Zhenro Properties Group Ltd 06158 HK HKD 22,756 8.4 6.5 4.9 3.9 1.4 1.2 1.1 0.9 18.4 4.4 Kaisa Group Holdings Ltd 01638 HK HKD 20,020 6.1 4.6 3.3 2.5 0.8 0.7 0.6 0.5 17.6 5.3 Zhongliang Holdings Group Co 02772 HK HKD 21,527 n.a. 4.4 3.1 2.4 n.a. 2.0 1.3 1.0 59.5 8.5 Powerlong Real Estate Holdin 01238 HK HKD 19,435 5.6 6.6 4.9 3.9 0.6 0.6 0.5 0.5 10.0 7.0 Simple Average 6.6 5.9 4.7 3.9 1.4 1.2 1.1 0.9 18.0 5.9

Weighted Average 7.1 6.2 5.1 4.2 1.3 1.2 1.0 0.8 21.5 6.5

HK listed mid-small developers with major revenue from mainland Holdings 03900 HK HKD 17,584 37.9 6.3 6.2 5.1 0.5 0.5 0.5 0.5 7.1 3.7 Yuzhou Properties Co 01628 HK HKD 18,365 3.9 3.8 3.1 2.8 0.9 0.7 0.6 0.5 20.4 10.8

Hopson Development Holdings 00754 HK HKD 17,181 3.0 5.7 4.7 4.0 0.3 n.a. n.a. n.a. n.a. 5.2 (03883 HK)

Ronshine China Holdings Ltd 03301 HK HKD 16,064 5.7 3.8 2.9 2.4 1.0 0.9 0.7 0.6 18.3 6.6 China Sce Group Holdings Ltd 01966 HK HKD 15,892 3.6 4.5 3.4 2.8 0.9 0.8 0.7 0.6 18.8 7.1 Gemdale Properties And Inves 00535 HK HKD 14,617 5.5 3.9 3.1 2.6 1.1 0.9 0.7 0.6 22.8 7.3

China Overseas Grand Oceans 00081 HK HKD 14,857 5.9 4.2 3.5 3.1 0.8 0.7 0.6 0.5 16.5 4.7 中国奥园 Central China Real Estate 00832 HK HKD 11,229 7.8 5.9 3.9 2.6 1.1 1.0 0.8 0.7 15.8 8.7 North Star Co Ltd-H 00588 HK HKD 10,913 4.9 n.a. n.a. n.a. 0.4 n.a. n.a. n.a. n.a. n.a. Dexin China Holdings Co Ltd 02019 HK HKD 8,482 3.7 4.4 3.8 3.4 3.0 1.4 1.0 0.8 16.5 n.a.

Redsun Properties Group Ltd 01996 HK HKD 8,466 3.3 5.1 3.9 3.0 0.6 0.5 ] 2 0.5r a M 0.4t h g i 10.6R _ e l 5.0b a T [

China Aoyuan Beijing Capital Land Ltd-H 02868 HK HKD 8,054 5.0 2.1 1.8 1.5 0.5 0.2 0.2 0.2 6.6 11.1 Greenland Hong Kong Holdings 00337 HK HKD 8,096 4.0 3.6 3.0 n.a. 0.7 n.a. n.a. n.a. n.a. n.a. Group Co 01777 HK HKD 7,670 8.9 3.6 3.2 n.a. 0.5 n.a. n.a. n.a. n.a. 5.1 China South City Holdings 01668 HK HKD 7,459 1.6 2.3 n.a. n.a. 0.2 0.2 n.a. n.a. 9.0 4.0 C&D International Investment 01908 HK HKD 7,297 3.5 4.0 3.0 2.4 1.5 0.9 0.8 0.7 21.9 11.4 Guorui Properties Ltd 02329 HK HKD 7,067 5.9 n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a. n.a. Shanghai Industrial Urban De 00563 HK HKD 4,713 8.2 n.a. n.a. n.a. 0.4 n.a. n.a. n.a. n.a. n.a. Dafa Properties Group Ltd 06111 HK HKD 4,454 6.2 5.5 4.0 3.2 1.1 0.9 0.8 0.7 18.6 4.8 Minmetals Land Ltd 00230 HK HKD 4,217 3.8 4.7 4.3 3.9 0.3 0.4 0.4 0.4 9.0 7.0 Modern Land China Co Ltd 01107 HK HKD 2,991 4.8 3.4 2.8 2.3 0.5 0.3 0.3 0.3 13.1 6.1 Glorious Property Holdings 00845 HK HKD 1,948 3.0 n.a. n.a. n.a. 0.3 n.a. n.a. n.a. n.a. n.a.

Top Spring International Hld 03688 HK HKD 1,893 19.1 n.a. n.a. n.a. 0.2 n.a. n.a. n.a. n.a. n.a. Zhong An Group Ltd 00672 HK HKD 1,336 3.9 n.a. n.a. n.a. 0.2 n.a. n.a. n.a. n.a. n.a. Simple Average 4.8 4.1 3.4 2.8 0.5 0.7 0.6 0.5 16.5 6.4

Weighted Average 6.8 4.3 3.6 3.0 0.7 0.7 0.6 0.5 15.0 6.8

Source: the Company, Guotai Junan International .

Company Report

See the last page for disclaimer Page 7 of 9 [Table_PageHeader]China Aoyuan (03883 HK)

] 1 r a M t h g i R _ e l b a T [ Financial Statements and Ratios [Table_IncomeStatement] Income Statement [Table_BalanceSheet] Balance Sheet

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F

Total revenue 19,115 31,006 52,577 82,151 98,392 PPE 719 2,057 2,259 2,462 2,601

- Sales of properties 17,960 29,740 50,769 79,660 95,426 Investment properties 6,360 8,833 9,359 10,181 11,165

- Other revenue 1,155 1,266 1,808 2,491 2,965 Interests in associates & JVs 214 1,939 2,674 2,941 3,121

Cost of sales (14,004) (21,372) (36,976) (58,193) (70,041) Deferred tax assets 305 677 745 819 901

Gross profit 5,111 9,634 15,601 23,958 28,350 Deposites paid for acquisitions 1,246 1,573 1,730 1,903 2,094

- Other income and gains, net 292 (223) 140 292 461 Other non-current assets 852 1,972 2,403 2,549 2,696 26 November2019 - Fair value gains on IPs 337 544 490 515 540 Total non-current assets 9,696 17,051 19,170 20,855 22,578

- Change in FV upon transfer to IPs 0 321 257 282 310

- Gain (loss) on disposal of subsidiaries (4) 222 178 190 202 Properties under development 66,523 101,180 151,805 198,520 249,740

- Selling and marketing expenses (926) (1,432) (2,366) (3,615) (4,231) Completed properties for sale 10,546 13,714 14,125 14,267 14,695

- Administrative expenses (800) (1,736) (2,629) (4,025) (4,723) Trade and other receivables 7,407 12,274 21,541 35,758 42,445 Operating profit 4,010 7,330 11,671 17,597 20,911 Structured deposites 0 1,328 1,660 1,992 2,291 - Finance income/(costs), net (268) (411) (572) (745) (868) Restricted bank deposites 1,771 2,281 3,894 6,111 7,320

- Share of results of JVs (116) 37 40 44 49 Cash & cash equivalents 24,769 32,937 49,960 51,565 48,478

- Share of results of associates 0 (2) 2 3 4 Other current assets 5,094 8,093 14,136 16,767 17,609

Profit before tax 3,626 6,954 11,141 16,899 20,094 Total current assets 116,110 171,808 257,122 324,980 382,577

Income tax (1,674) (4,015) (5,802) (8,801) (10,465) Total assets 125,806 188,858 276,292 345,834 405,156

Profit after tax 1,952 2,939 5,339 8,098 9,629

] 2 r a M t h g i R _ e l b a T [

Non-controlling interest (312) (531) (1,014) (1,620) (2,022) Trade and other payables 14,579 25,565 37,596 50,293 51,454

Shareholders' profit / loss 1,640 2,409 4,324 6,478 7,607 Contract liabilities 34,760 59,966 98,195 125,332 152,723

Underlying net profit 1,305 2,242 4,083 6,181 7,249 Current tax liabilities 3,172 5,535 5,701 5,872 6,048

Basic EPS (RMB/share) 0.613 0.899 1.614 2.418 2.839 Bank borrowings 13,371 19,261 30,818 36,982 44,378 0.488 0.837 1.524 2.307 2.706 Underlying EPS (RMB/share) Senior notes and bonds 7,118 4,470 6,259 7,510 7,886 Other current liabilities 2,572 6,235 6,779 7,269 7,523

[Table_CashFlowStatement] Cash Flow Statement Total current liabilities 75,573 121,033 185,348 233,259 270,012

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F

Operating activities Bank borrowings 14,423 21,490 30,086 37,607 43,248

Profit before taxation 3,626 6,954 11,141 16,899 20,094 Deferred tax liabilities 691 1,184 1,480 1,628 1,710

Finance costs 268 411 572 745 868 Senior notes and bonds 5,457 12,500 18,750 20,625 22,687

D&A 54 119 195 224 252 Other non-current liabilities 2,535 1,918 2,229 2,332 2,442

Total non-current liabilities 23,106 37,092 52,544 62,192 70,087 (03883 HK) Fair value gains on IPs (337) (544) (490) (515) (540)

Change in FV upon transfer to IPs 0 (321) (257) (282) (310) Total liabilities 98,680 158,124 237,893 295,451 340,099

Share of results of JVs 116 (37) (40) (44) (49)

Share of results of associates (0) 2 (2) (3) (4) Total shareholders' equity 10,155 11,872 15,480 20,986 27,570 中国奥园

Interest income (95) (258) (323) (377) (434) Minority interest 16,971 18,862 22,919 29,397 37,486

Others (149) 393 120 17 (101) Total equity 27,126 30,734 38,399 50,383 65,056

Changes in working capital: (6,926) 7,829 (10,817) (21,111) (29,628)

[Table_FinancialRatio] Financial] 2 r Ratioa sM t h g i R _ e l b a T [

Net cash from operations (3,443) 14,548 99 (4,448) (9,851) China Aoyuan Income taxes paid (1,313) (2,385) (3,017) (4,576) (5,442) 2017A 2018A 2019F 2020F 2021F LAT paid (2,007) (3,576) (2,785) (4,225) (5,024) Revenue Growth (%) 61.6 62.2 69.6 56.2 19.8

Cash from operating activities (6,763) 8,588 (5,703) (13,249) (20,316) Gross Profit Growth (%) 26.7 31.1 29.7 29.2 28.8

Investing activities Reported Net Profit Growth (%) 86.2 46.9 79.5 49.8 17.4

Increase in restricted bank deposites, net (1,285) (510) (1,613) (2,216) (1,209) Underlying Net Profit Growth (%) 37.5 71.8 82.1 51.4 17.3

Increase in other bank deposites, net 0 (4,403) (4,945) (2,638) (798)

Acquisitions of subsidiaries (5,098) (5,794) (4,859) (2,796) (1,833) Gross Margin (%) 26.7 31.1 29.7 29.2 28.8

Investments in associates and JVs (102) (1,568) (735) (267) (180) Operating Profit Margin (%) 21.0 23.6 22.2 21.4 21.3

Other investing cash flow (3,458) (4,689) (907) (1,085) (1,169) Reported Net Margin (%) 8.6 7.8 8.2 7.9 7.7

Cash from investing activities (9,944) (16,963) (13,059) (9,003) (5,190) Underlying Net Margin (%) 6.8 7.2 7.8 7.5 7.4

Financing activities ROE (%) 17.2 21.9 31.6 35.5 31.3

Bank and other borrowings raised, net 19,663 11,107 20,153 13,685 13,037 ROA (%) 1.7 1.5 1.9 2.1 2.0

Issue of senior notes and bonds, net 1,063 3,748 8,038 3,127 2,438 Net Gearing Ratio 51.0 58.9 59.1 65.6 76.3

Dividends paid (401) (670) (964) (1,731) (2,593) Debt to Equity Ratio 187.8 223.7 203.9 181.7 0.0

Other financing cash flow 10,721 2,186 8,558 8,776 9,537

Cash from financing activities 31,046 16,370 35,785 23,857 22,420 Underlying P/E (x) 19.1 11.7 6.6 4.4 3.7

Net changes in cash 14,339 7,995 17,023 1,605 (3,087) P/E (Basic) (x) 15.2 10.9 6.2 4.2 3.5

Cash at beginning of year 10,471 24,769 32,937 49,960 51,565 P/E (Diluted) (x) 15.2 10.9 6.2 4.2 3.5

Exchange losses (41) 173 0 0 0 P/B (x) 2.5 2.2 1.7 1.3 1.0

Cash at end of year 24,769 32,937 49,960 51,565 48,478 Dividend Yield (%) 2.7 3.7 6.4 9.6 11.3 Company Report

Source: the Company, Guotai Junan International.

[Table_CompanyRatingDefinition] See the last page for disclaimer Page 8 of 9 [Table_PageHeader]China Aoyuan (03883 HK)

] 1 r a M t h g i R _ e l b a T [

Company Rating Definition The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. 26 November2019 Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

or the fundamental outlook of the sector is favorable. ] 2 r a M t h g i R _ e l b a T [

Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERE OF INTERESTS STS] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for CH TIANBAO GP (01427 HK),KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),JXR (01951 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT (02886 HK),CAM SCSMALLCAP (03157 HK),HAITIAN ANTENNA (08227 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have had investment banking relationships with the issuer mentioned in this Research Report (03883 HK) within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report.

(6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research 中国奥园 Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

] 2 r a M t h g i R _ e l b a T [

China Aoyuan DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

© 2019 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk Company Report

See the last page for disclaimer Page 9 of 9