Speed Shifting to a Lower Gear but Quality Is Improving, Maintain

股

票

研 [Table_Title] Van Liu 刘斐凡 Company Report: Country Garden (02007 HK)

究 (86755) 2397 6672 EquityResearch 公司报告：碧桂园 (02007 HK) [email protected]

27 March 2019 Speed[Table_Summary Shifting] to a Lower Gear but Quality is Improving, Maintain "Accumulate"

速度换低档速但质量提升，维持“收集” 公

司  2018 underlying net profit was in line with our expectation. Top line Rating:[Table_Rank] Accumulate increased by 67.1% YoY to RMB379,079 mn in 2018. Underlying net profit Maintained 报 elevated 31.4% YoY to RMB33,864 mn. 告评级：收集 (维持)

 Contracted sales will sustainably grow but at a slower rate. We estimate CompanyReport that saleable resources in 2019 may reach over RMB780.2 bn. We estimate sale-through rate to decrease to below 70.0% in 2019 to factor in declining 6[Table_Price]-18m TP 目标价 : HK$13.61 demand in lower-tier cities. Revised from 原目标价: HK$12.28

 We expect stable gross margins and healthy net gearing ratio. We Share price 股价: HK$11.960

estimate that the Company’s unit land cost was less than RMB2,742 per 告

sq.m., 32.6% of ASP during Jan.-Feb. 2019. We expect net gearing ratio to 证报 be no higher than 56.4% during the same period. Stock performance 券股价表现 究 With slower contracted sales growth, we think the Company should justify a

研 higher NAV discount than our previous expectations. Nevertheless, as we

[Table_QuotePic] 研

究 revise up the underlying net profit, we revise up the Company’s target price

券 from HK$12.28 to HK$13.61, which represents a 40% discount to the

报 Company’s 2019E NAV of HK$22.68 per share, 6.1x underlying 2019 PER

告证 and 1.5x 2019 PBR. We maintain "Accumulate". Risks: (1) EquityResearch Report lower-than-expected contracted sales and (2) ASP slashing in lower-tier

cities.

 2018 年核心净利符合预期。2018 年总收入同比增长 67.1%到人民币 3,790.79 亿元。核心 [Tab 净利同比增 31.4%到人民币 338.64 亿元。 le_I  合约销售将以较低的速率持续增长。我们预测 2019 年的可售货源为人民币 7,802 亿元。 nfo1 我们测算 2019 年的去化率将下降至 70.0%以下以反映低线城市的需求下降。  我们预计稳定的毛利率和健康的净资产负债率。我们测算公司单位土地成本低于人民币 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y ] 房 2,742 元每平米，为 2019 年 1-2 月销售均价的 32.6%。我们预计净资产负债率在同期不会股价变动 1 个月 3 个月 1 年高于 56.4% Abs. % 地绝对变动 % 14.3 34.5 (24.6) 产基于放缓的合约销售增速，我们认为公司应适用一个较我们早前预期更高的每股净资产折 Rel. % to HS Index  相对恒指变动 % 15.0 22.4 (17.4) 行让。然而，由于我们上调了核心净利，我们将目标价从 12.28 港元上调至 13.61 港元，相 Avg. Share price(HK$) 平均股价（港元） 15.0 15.6 11.6 业当于较 22.68 港元的 2019 年每股净资产有 40%的折让，也分别相当于 6.1 倍 2019 年核心 Source: Bloomberg, Guotai Junan International.

Property Sector 市盈率和 1.5 倍 2019 年市净率。我们维持“收集”。风险：（1）低于预期的房屋销售和（2）低线城市房价下滑。

[Tab

le_I Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE Profit] nfo2 年结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 226,900 26,064 1.225 135.1 8.1 4.413 2.3 0.407 4.1 31.8 2018A 379,079 34,618 1.552 26.7 6.8 5.651 1.9 0.493 4.7 32.2 碧 2019F 460,170 41,237 1.920 23.7 5.3 7.769 1.3 0.587 5.8 28.6 桂 2020F 538,807 48,477 2.258 17.6 4.5 10.258 1.0 0.690 6.8 25.0 园 2021F 624,402 54,961 2.560 13.4 4.0 13.081 0.8 0.782 7.7 21.9

[Table_BaseData]Shares in issue (m) 总股数 (m) 21,647.7 Major shareholder 大股东 Yang Huiyan 57.2% Market cap. (HK$ m) 市值 (HK$ m) 258,906.5 Free float (%) 自由流通比率 (%) 42.8 3 month average vol. 3 个月平均成交股数 (‘000) 48,659.1 FY19 Net gearing (%) FY19 净负债/股东资金 (%) 56.4

CountryHK) Garden (02007 52 Weeks high/low (HK$) 52 周高/低 (HK$) 16.920 / 7.710 FY19 Est. NAV (HK$) FY19 每股估值（港元） 22.7

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 1 of 8

[Table_PageHeader]Country Garden (02007 HK)

The property sector will face headwinds in sales and investment in 2019. During Jan.-Feb. 2019, YoY increase in

commodity house sales increased 0.1 ppts compared to that during Jan.-Nov. 2018. Investment] 1 r maintaineda M t h ag steadyi R _ YoYe growthl b a T [

rate. Moreover, land area sold recorded rapid YoY growth of 14.2% during the same period. Sources of funds for real estate

development enterprises recorded moderate YoY growth of 6.4%. However, sales and investment in 2019 is expected to be lower riding on still tightening external environment and high leverage ratio of residents accompanied with escalating downside pressure on the economy.

Figure 1: Cumulative House Sales Amount in China Figure 2: Cumulative House Sales GFA in China 27 March2019

16,000 70.0% 1,800 45.0% 14,000 60.0% 1,600 40.0% 35.0% 12,000 50.0% 1,400 30.0% 10,000 40.0% 1,200 25.0% 1,000 8,000 30.0% 20.0% 800 15.0% 6,000 20.0% 600 10.0% 5.0% 4,000 10.0% 400 0.0% 2,000 0.0% 200 -5.0%

0 -10.0% 0 -10.0%

15 15 16 16 17 17 18 18

15 15 16 16 17 17 18

15 16 17 18

16 17 18

------

- - -

- - - -

- - -

Apr Oct Apr Oct Apr Oct Apr Oct

Jun Jun Jun Jun

Feb Feb Feb

Aug Dec Aug Dec Aug Dec Aug 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)

] 2 r a M t h g i R _ e l b a T [ Amount Sold YTD YoY of Commodity Houses (RHS) GFA Sold of Commodity Houses (RHS) Amount Sold YTD YoY of Residential Houses (RHS) GFA Sold of Residential Houses (RHS)

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

Figure 3: Key Property Development and Sales Data

30.0% 15.8% 20.0% 1.0% 22.5% 7.0% 12.0% 6.5% 8.1% 13.0% 1.0% 10.0% 7.7% 6.0% 10.5% 6.9% 7.0% 0.0% -7.6% 2014 2015 2016 2017 2018F 2019F -10.0% -4.4% -2.0% -10.7% -14.0% -14.0% -7.8% -8.7% (02007 HK) -20.0% -3.4% -31.7%

-30.0% 碧桂园 -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.

Country Garden 2018 underlying net profit was in line with our expectation. Top line increased by 67.1% YoY to RMB379,079 mn in 2018 due to strong contracted sales growth, strict construction management control and timely delivery of units. Gross profit amounted to RMB102,476 mn, surging up 74.3% YoY. Riding on higher proportion of minority interests, net profit rose 32.8% YoY to RMB34,618 mn, which was in line with our expectation. If we exclude after-tax fair value gains on IP and exchange losses, underlying net profit increased 31.4% YoY to RMB33,864 mn, which was also in line with our expectation. The Company recorded gross margin gain of 1.1 ppts YoY due to elevating ASP. Underlying net profit margin decreased 2.4 ppts YoY to 8.9%. Net gearing ratio decreased by 7.4 ppts YoY riding on slower expansion of inventories. Cash balance also dramatically increased 63.4% YoY to RMB779,087 mn given total debt expansion and rising cash collection.

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See the last page for disclaimer Page 2 of 8 [Table_PageHeader]Country Garden (02007 HK)

Table 1: Comparison of the Company’s Balance Sheet and Income Statement in 2017 and 2018

RMB mn 2017A ] 1 2018Ar a M t h g i R _ Changee l b a T [

Total revenue 226,900 379,079 67.1%

Gross Profit 58,785 102,476 74.3% GPM 25.9% 27.0% 1.1 ppts Net Profit (Inc. after-tax fair value gains on IP) 26,064 34,618 32.8% Net Profit (Ex. after-tax fair value gains on IP) 25,781 33,864 31.4%

NPM (Inc. after-tax fair value gains on IP) 11.5% 9.1% -2.4 ppts 27 March2019 NPM (Ex. after-tax fair value gains on IP) 11.4% 8.9% -2.4 ppts DPS (RMB cent) 40.7 49.3 21.2% Underlying EPS (RMB cent) 122.8 161.2 31.3% Total Cash on Hand 148,402 242,543 63.4% Total Asset 1,049,669 1,629,694 55.3% Properties for Sale 487,649 779,087 59.8% Total Debt 197,951 296,460 49.8% Shareholders' equity 93,671 121,330 29.5% ROE 31.8% 32.2% 0.4 ppts

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

Net Gearing Ratio 56.9% 49.6% -7.4 ppts Source: the Company, Guotai Junan International.

We expect housing demand in lower-tier cities to turn weak, which will weigh on the Company's attributable contracted sales in 2019. During 2018, attributable contracted sales amounted to RMB501.9 bn, up by 31.2% YoY. The Company has not set a 2019 sales target. The management will launch new saleable resources based on future sales condition. The Company possesses sufficient saleable resources of RMB780.2 bn, of which 14.2%/ 33.3%/ 52.6% are targeted in tier-1 cities/ tier-2 cities/ tier-3 and tier-4 cities, respectively. The Company’s sale-through rate in 2017 was 76.4%. With the negative effects from

tightening of shantytown redevelopment, asset demand in lower-tier cities is gradually becoming weak. Thus, the 2019 sale-through rate is likely to trend down. Therefore, attributable contracted sales in 2019 could still record YoY increase but with a slower growth rate of approximately 10.0%.

(02007 HK) Figure 4: Country Garden’s Attributable Contracted Sales Figure 5: Country Garden’s Attributable Contracted

Breakdown by City Tier in 2018 Sales Breakdown by Region in 2018 碧桂园

Located in Tier 1 Located in Tier 2 cities,targeting cities,targeting Tier 1 cities, 9% Tier 1 cities, 2% Guangdong 24% Located in Tier Others 31% 3&4 cities, targeting Tier 1

cities, 1% Country Garden Located in Tier 3&4 cities,targeting Located in Tier 2 Tier 3&4 cities, cities,targeting 60% Tier 2 cities, 27% Shandong 4% Jiansu 12% Located in Tier Guangxi 4% 3&4 cities, targeting Tier 2 Henan 4% cities, 1% Hunan 5% Anhui 7% Zhejiang 9% Source: the Company. Source: the Company.

The Company slowed its land replenishment initiatives, in line with its expected sales growth, which could decrease the Company's operating risks. During 2018, the Company acquired 797 parcels of land with total attributable GFA of 86.48 mn sq.m., down 1.5% YoY, in line with its expected sales growth. Average land cost amounted to RMB2,203 per sq.m. and 40%

of all newly acquired projects targeted tier-1 and tier-2 cities in terms of value. Less cash occupancy alongside slowdown in land acquisition will help enhance the Company's fundamentals.

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See the last page for disclaimer Page 3 of 8 [Table_PageHeader]Country Garden (02007 HK)

Figure 6: Country Garden’s Land Replenishment Breakdown Figure 7: Country Garden’s Land Replenishment by City Tier (Value) During 2018 Breakdown by City Tier (GFA) During 2018

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

Located in Tier 1 Located in Tier 1 cities,targeting Located in Tier 2

Located in Tier 2 cities,targeting Tier 1 cities, 9% cities,targeting cities,targeting Tier 1 cities, 3% Tier 1 cities, 1% Located in Tier Tier 1 cities, 2% 3&4 cities, Located in Tier targeting Tier 1 3&4 cities, cities, 2% targeting Tier 1 cities, 1% Located in Tier Located in Tier 3&4 3&4

cities,targeting cities,targeting 27 March2019 Located in Tier 2 Located in Tier 2 Tier 3&4 cities, Tier 3&4 cities, cities,targeting cities,targeting 60% 76% Tier 2 cities, 27% Tier 2 cities, 17%

Located in Tier 3&4 cities, Located in Tier targeting Tier 2 3&4 cities, cities, 1% targeting Tier 2 cities, 1%

Source: the Company. Source: the Company.

Enormous land bank scale with adequate exposure in Greater Bay Area support the Company's future development. As at Dec. 2018, total attributable GFA amounted to 240.6 mn sq.m. Total attributable saleable resources amounted to RMB2,868.4 bn of which RMB372.1 bn is located in the Greater Bay Area. In addition, the company also owned potential saleable resources

] 2 r a M t h g i R _ e l b a T [ of RMB555.4 bn in the Greater Bay Area. We estimate that the Company’s unit land cost was less than RMB2,742 per sq.m., 32.6% of ASP in Jan.-Feb. 2019. That is, we estimate gross margin in 2019-2021 to range from 26.8% to 27.6%.

We expect decreasing funding cost and healthy leverage ratio to remain. Comparing with 2017, average funding costs increased 0.67 ppts to 6.41 in 2018. We expect funding costs to decrease on the grounds of easing expectation on the monetary environment. Alongside slowing down of contracted sales growth, we expect the Company's net gearing ratio to increase in 2019. However, we think that growing cash collection from increasing contracted sales will make net gearing ratio remain at a healthy level during 2019-2021. We estimate net gearing ratio to remain below 56.4% in 2019-2021.

We revise up underlying profit estimations. We expect Country Garden's contracted sales growth rate to slow down as per

our previous assumptions. Therefore, we have slightly adjusted total revenue in 2019F and 2020F by 3.2% and 6.6% to (02007 HK) RMB460,170 mn and RMB538,807 mn, respectively. With stable ASP and proper unit land costs, we expect stable gross margin

during 2019F to 2021F. As gross margin in 2018 was higher than our expectations, we revise up gross margin in 2019 and 2020 碧桂园 by 2.6 ppts and 2.6 ppts, respectively. Overall, we revise up 2019F and 2020F underlying net profit by 3.7% and 12.0% to RMB40,460 mn and RMB47,642 mn, respectively. With net gearing ratio in 2018 below our expectation, we revise down net gearing ratio in 2019F and 2020F by 13.7 ppts and 8.4 ppts, respectively.

Table 2: Revisions to 2018-2020 Profit Estimations Country Garden

RMB mn New estimation Old estimation Change 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F

Total revenue 460,170 538,807 624,402 446,108 505,242 n.a. 3.2% 6.6% n.a. Gross profit 126,834 146,857 167,448 111,542 124,372 n.a. 13.7% 18.1% n.a. Operating profit 93,369 107,239 121,261 78,988 87,192 n.a. 18.2% 23.0% n.a. Net profit 41,237 48,477 54,961 39,502 43,051 n.a. 4.4% 12.6% n.a. Underlying profit 40,460 47,642 54,077 39,024 42,553 n.a. 3.7% 12.0% n.a. Gross margin 27.6% 27.3% 26.8% 25.0% 24.6% n.a. 2.6 ppts 2.6 ppts n.a. Operating profit margin 20.3% 19.9% 19.4% 17.7% 17.3% n.a. 2.6 ppts 2.6 ppts n.a. Net profit margin 9.0% 9.0% 8.8% 8.9% 8.5% n.a. 0.1 ppts 0.5 ppts n.a. Underlying net profit margin 8.8% 8.8% 8.7% 8.7% 8.4% n.a. 0.0 ppts 0.4 ppts n.a.

ROE 28.6% 25.0% 21.9% 26.0% 21.9% n.a. 2.6 ppts 3.2 ppts n.a.

ROCE 29.7% 25.5% 22.5% 23.8% 20.9% n.a. 6.0 ppts 4.6 ppts n.a. Report

ROA 5.1% 5.4% 5.7% 4.4% 4.3% n.a. 0.8 ppts 1.1 ppts n.a. Net gearing ratio 56.4% 52.9% 53.9% 70.1% 61.4% n.a. -13.7 ppts -8.4 ppts n.a.

Source: Guotai Junan International.

Company

See the last page for disclaimer Page 4 of 8 [Table_PageHeader]Country Garden (02007 HK)

We maintain "Accumulate". Country Garden's contracted sales should maintain sustainable growth but at a slower rate due to

abundant saleable resources but housing demand is falling in lower-tier cities. Gross margin] 1 is likelyr a M to t stabilize.h g i CountryR _ e Gardenl b a T [

is expected to maintain healthy leverage ratio. Therefore, we think the Company should justify a higher NAV discount than our

previous expectation. As we revise up the Company's underlying net profit, we revise up the Company’s target price from HK$12.28 to HK$13.61, which represents a 40% discount to the Company’s 2019E NAV of HK$22.68 per share, 6.1x underlying 2019 PER and 1.5x 2019 PBR. We maintain Country Garden's investment rating as "Accumulate". Risks: (1) lower-than-expected contracted sales and (2) ASP slashing in lower-tier cities.

27 March2019 Table 3: Breakdown of Country Garden’s 2018 NAV NAV/share (RMB m) (HK$ m) (HK$) % of NAV % of GAV Development properties 508,816 598,607 27.88 122.9% 93.0% Investment property 38,037 44,749 2.08 9.2% 7.0% Gross asset value 546,852 643,356 29.96 132.1% 100.0% (Net debt) / Net cash -132,860 -156,306 (7.28) -32.1% NAV 413,992 487,049 22.68 100.0% NAV/Share 19.28 22.68 Source: the Company, Guotai Junan International.

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

Figure 8: Country Garden’s 3-Year Historical P/B Figure 9: Country Garden’s 3-Year Historical P/E

(02007 HK)

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

Country Garden

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See the last page for disclaimer Page 5 of 8 [Table_PageHeader]Country Garden (02007 HK)

Table 4: Peers Comparison

Company Stock Code Mkt Cap (HK$ m) Last Price HK$ PE PB ] 1 r a M t h g D/Y%i R _ ROEe l EV/EBITDAb a T [

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

HK listed large developers with major revenue from mainland

China Overseas Land & 00688 HK 310,060.5 28.300 6.8 5.8 5.1 1.0 0.8 0.8 3.9 15.1 3.9 InvestChina Evergrande 03333 HK 354,993.5 27.050 5.9 5.5 5.4 1.8 1.6 1.3 8.4 34.8 8.4 GroupChina Resources Land 01109 HK 226,295.2 32.650 8.0 7.0 6.1 1.3 1.1 0.9 4.3 16.8 4.3 LtdCountry Garden 02007 HK 258,906.3 11.960 5.3 4.6 4.1 1.4 1.2 1.0 5.9 30.4 5.9

HoldingsLongfor Group Co Holdings 00960 HK 154,827.7 26.050 8.0 6.6 5.5 1.4 1.2 1.1 5.4 19.0 5.4 27 March2019 LtdChina Vanke Co Ltd-H 02202 HK 361,169.3 30.150 6.9 6.1 5.3 1.6 1.3 1.1 5.0 24.2 5.0 Sunac China Holdings 01918 HK 160,524.3 36.350 6.0 4.7 n.a. 1.9 1.4 n.a. 3.5 30.6 3.5 LtdAgile Group Holdings 03383 HK 46,064.5 11.760 4.9 4.2 3.7 0.8 0.7 0.7 9.4 16.9 9.4 LtdShimao Property 00813 HK 72,963.0 22.100 5.6 4.6 3.8 0.9 0.8 0.7 6.9 16.7 6.9 HoldingsGuangzhou Ltd R&F 02777 HK 54,264.7 16.840 3.7 3.1 2.5 0.6 0.5 0.5 11.0 17.5 11.0 PropertiesBbmg Corp -- H 02009 HK 47,607.8 2.770 5.7 5.5 n.a. 0.4 0.4 n.a. 3.2 8.8 3.2 Sino-Ocean Group 03377 HK 24,675.8 3.240 5.1 4.0 3.8 0.4 0.4 0.4 8.7 7.9 8.7 HoldingChina Jinmao Ltd Holdings 00817 HK 55,003.4 4.760 7.1 5.6 4.5 1.1 1.0 0.8 5.7 15.0 5.7 GroupHopson Development 00754 HK 16,202.1 7.280 7.9 7.2 n.a. n.a. n.a. n.a. 3.7 n.a. 3.7 HoldingsZhenro Properties 06158 HK 22,552.8 5.470 5.7 4.0 3.3 1.1 0.9 0.8 n.a. 18.1 n.a. GroupKwg Group Ltd Holdings Ltd 01813 HK 27,043.1 8.520 4.2 3.4 3.1 0.7 0.6 0.5 8.6 16.5 8.6 Yuexiu Property Co Ltd 00123 HK 22,694.4 1.830 6.7 6.0 6.0 0.5 0.5 0.5 6.0 7.9 6.0

Shenzhen Investment 00604 HK 25,235.8 2.990 7.9 7.6 n.a. 0.5 0.5] 2 r n.a.a M t h 5.7g i R _ 7.1 e l b 5.7a T [

LtdRonshine China 03301 HK 19,651.0 12.200 4.1 3.2 2.8 1.0 0.7 n.a. 5.4 26.9 5.4 HoldingsYuzhou Properties Ltd Co 01628 HK 21,169.5 4.410 3.7 3.2 2.6 0.8 0.7 0.6 9.4 21.0 9.4 Greentown China 03900 HK 17,057.5 7.860 5.5 5.3 4.7 0.5 0.4 0.4 4.0 7.9 4.0 HoldingsChina Aoyuan Group 03883 HK 23,565.4 8.800 5.4 3.8 2.8 1.5 1.2 1.1 7.4 27.9 7.4 LtdSoho China Ltd 00410 HK 16,638.5 3.200 32.2 28.8 n.a. 0.4 0.4 n.a. 3.5 1.2 3.5 Median 5.7 5.3 3.9 0.9 0.8 0.8 5.7 16.8 5.7

Simple Average 7.1 6.1 4.2 1.0 0.8 0.8 6.1 17.6 6.1

Weighted Average 6.5 5.7 4.9 1.3 1.1 1.0 5.7 22.7 5.7

HK listed mid-small developers with major revenue from mainlandChina Overseas Grand 00081 HK 14,035.8 4.100 5.1 4.0 3.0 0.6 0.6 0.5 4.1 12.7 4.1 OceansPoly Property Group Co 00119 HK 11,021.2 3.010 4.0 3.7 n.a. 0.3 0.3 n.a. 7.6 10.1 7.6

LtdShanghai Industrial 00563 HK 7,938.1 1.650 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (02007 HK) UrbanModern De Land China Co 01107 HK 3,626.9 1.300 3.2 2.7 3.7 0.5 0.5 0.4 8.6 14.8 8.6 LtdPowerlong Real Estate 01238 HK 15,949.2 3.990 3.5 2.8 0.0 0.4 0.4 0.4 9.7 12.4 9.7

HoldinC C Land Holdings Ltd 01224 HK 6,910.6 1.780 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 碧桂园 Fantasia Holdings 01777 HK 8,644.4 1.500 5.6 5.1 n.a. 0.5 0.5 n.a. 5.1 7.0 5.1 GroupYuexiu CoReal Estate 00405 HK 17,001.9 5.450 19.0 18.7 n.a. 1.0 1.0 1.2 6.2 8.1 6.2 InvestmenCentral China Real 00832 HK 10,023.7 3.670 5.9 4.4 n.a. 0.8 0.7 n.a. 5.1 15.1 5.1 EstateChina Sce Group 01966 HK 16,628.3 4.030 4.3 3.4 3.0 0.8 0.7 0.6 7.5 19.4 7.5

HoldingsTop Spring Ltd International 03688 HK 3,284.2 2.370 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Country Garden HldBeijing Capital Land 02868 HK 8,508.6 2.810 n.a. n.a. n.a. n.a. n.a. n.a. 8.7 n.a. 8.7 LtdZhong-H An Real Estate 00672 HK 1,859.3 0.320 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. LtdBeijing North Star Co 00588 HK 12,183.8 2.590 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. LtdChina-H South City 01668 HK 10,146.4 1.250 3.0 2.5 2.0 0.3 0.3 0.2 5.8 7.2 5.8 HoldingsShui On Land Ltd 00272 HK 15,398.8 1.910 7.0 6.1 18.2 0.3 0.3 0.3 5.7 4.2 5.7 Glorious Property 00845 HK 3,039.1 0.390 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. HoldingsMedian 4.7 3.8 3.0 0.5 0.5 0.4 6.2 11.2 6.2

Simple Average 6.1 5.3 5.0 0.6 0.5 0.5 6.7 11.1 6.7

Weighted Average 6.7 6.0 5.4 0.6 0.5 0.6 6.7 11.0 6.6 Source: the Company, Guotai Junan International .

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See the last page for disclaimer Page 6 of 8 [Table_PageHeader]Country Garden (02007 HK)

Financial Statements and Ratios

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

Income Statement 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 226,900 379,079 460,170 538,807 624,402 PPE 21,628 23,421 25,363 27,465 29,742

- Sales of Properties 220,157 369,405 446,504 521,665 603,348 Properties under Development 98,840 107,812 111,046 114,378 117,809

- Other Income 6,635 9,447 13,432 16,901 20,806 Land Use Rights 2,425 2,496 2,446 2,397 2,349

Cost of Sales (168,114) (276,603) (333,336) (391,950) (456,955) Investment Property 8,338 16,435 17,217 18,078 19,024

Gross Profit 58,785 102,476 126,834 146,857 167,448 Other Non-current Assets 50,522 79,780 84,902 90,548 96,763 27 March2019 - Change in Fair Value of IPs 505 1,732 1,814 1,905 2,005 Total Non-current Assets 181,754 229,944 240,974 252,866 265,688

- SG&A (18,303) (31,534) (39,661) (45,975) (52,745) Cash & Cash Equivalents 137,084 228,343 210,735 199,606 172,925

- Other Gains, Net 2,611 4,344 4,382 4,451 4,553 Properties under Development 360,922 626,937 759,112 866,158 947,107 Operating Profit 43,598 77,018 93,369 107,239 121,261 Completed Properties 27,886 44,338 46,555 48,883 51,327 - Finance income/(costs), net 3,276 1,348 1,652 1,926 1,777 Restricted Cash 11,318 14,200 17,164 20,053 23,193

- Others (352) 1,197 1,317 1,448 1,593 Trade and Other Receivables 270,541 426,397 491,730 546,972 602,171

Profit before Tax 46,522 79,563 96,338 110,613 124,631 Other Current Assets 60,164 59,535 56,751 57,218 59,456

Income Tax (17,770) (31,021) (38,258) (42,335) (47,221) Total Current Assets 867,915 1,399,750 1,582,047 1,738,890 1,856,178

Profit after Tax 28,752 48,542 58,080 68,278 77,410 Total Assets 1,049,669 1,629,694 1,823,021 1,991,756 2,121,866

Non-controlling Interest (2,688) (13,924) (16,843) (19,800) (22,449)

Shareholders' Profit / Loss 26,064 34,618 41,237 48,477 54,961 Contracted Liabilities 346,747 562,800 607,963 613,387 568,753

Adjusted Net Profit 25,781 33,864 40,460 47,642 54,077 Trade and Other Payables 330,884 498,821 544,974 603,007 660,368

] 2 r a M t h g i R _ e l b a T [ Basic EPS 1.225 1.552 1.920 2.258 2.560 Bank Borrowings 47,672 91,844 101,028 104,059 107,181

Underlying EPS (RMB) 1.211 1.518 1.884 2.219 2.518 Other Current Liabilities 44,234 65,941 70,006 76,657 83,648 Total Current Liabilities 769,537 1,219,406 1,323,971 1,397,110 1,419,950

[Table_CashFlowStatement] Cash Flow Statement Long-term Borrowings 87,845 139,839 153,707 162,930 172,705

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Senior Notes 28,118 39,478 43,426 47,768 52,545

Operating Activities Debentures 30,520 23,061 25,367 27,904 30,694

Profit before Taxation 28,752 48,542 58,080 68,278 77,410 Other Long-term Liabilities 17,037 34,502 40,822 47,054 53,919

Income Tax Expenses 17,770 31,021 38,258 42,335 47,221 Total Non-current Liabilities 163,521 236,880 263,322 285,655 309,864

D&A 825 1,044 1,148 1,263 1,390 Total Liabilities 933,057 1,456,286 1,587,293 1,682,765 1,729,814

Others (4,143) (4,249) (4,091) (3,967) (3,874)

Changes in Working Capital: 10,797 (59,107) (98,582) (90,629) (114,240) Total Shareholders' Equity 93,671 121,330 166,807 220,269 280,882

Net Cash from Operations 54,001 17,251 (5,187) 17,280 7,906 Minority Interest 22,941 52,078 68,921 88,722 111,171 Total Equity 116,612 173,408 235,728 308,991 392,052 Interest Paid (10,802) (19,129) (19,193) (20,166) (21,880) (02007 HK)

Income Taxes Paid (19,115) (12,572) (30,553) (32,565) (36,923) [Table_FinancialRatio]

Cash from Operating Activities 24,084 (14,450) (54,933) (35,451) (50,897) Financial Ratios 碧桂园 Investing Activities 2017A 2018A 2019F 2020F 2021F

Additions to PPE (3,301) (1,793) (1,942) (2,102) (2,277) Revenue Growth (%) 48.6 67.8 20.9 16.8 15.7

Other Investing Cash Flow (41,083) (17,588) (6,250) (6,778) (7,387) Gross Profit Growth (%) 82.4 74.3 23.8 15.8 14.0

Cash from Investing Activities (44,385) (19,381) (8,192) (8,880) (9,664) Reported Net Profit Growth (%) 126.3 32.8 19.1 17.6 13.4

Financing Activities Underlying Net Profit Growth (%) 131.6 31.4 19.5 17.8 13.5 Country Garden Debt Raised/(Repaid) 85,510 98,509 29,083 18,931 20,283 Dividends Paid (5,382) (10,580) (12,603) (14,816) (16,797) Gross Margin (%) 25.9 27.0 27.6 27.3 26.8

Proceeds from Issuing Shares (1,216) 0 0 0 0 Operating Profit Margin (%) 19.2 20.3 20.3 19.9 19.4

Other Financing Cash Flow (6,090) 37,236 29,105 29,148 30,449 Net Margin (%) 11.5 9.1 9.0 9.0 8.8

Cash from Financing Activities 72,822 125,165 45,584 33,263 33,935 Adjusted Net Margin (%) 11.4 8.9 8.8 8.8 8.7

Net Changes in Cash 52,521 91,334 (17,540) (11,068) (26,626) ROE (%) 31.8 32.2 28.6 25.0 21.9

Cash at Beg of Year 84,647 137,084 228,343 210,735 199,606 ROCE (%) 28.7 34.8 29.7 25.5 22.5

Exchange Losses (84) (75) (68) (61) (55) ROA (%) 4.2 4.7 5.1 5.4 5.7

Cash at End of Year 137,084 228,343 210,735 199,606 172,925 Net Gearing Ratio 56.9 49.6 56.4 52.9 53.9

Debt to Equity Ratio 229.3 270.7 216.3 174.0 145.0

Underlying P/E (x) 8.2 6.9 5.4 4.6 4.0

P/E (Basic) (x) 8.1 6.5 5.3 4.5 4.0

P/E (Diluted) (x) 8.1 6.8 5.3 4.5 4.0

P/B (x) 2.3 1.9 1.3 1.0 0.8

Dividend Yield (%) 4.1 4.7 5.8 6.8 7.7

Report

Source: the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 7 of 8 [Table_PageHeader]Country Garden (02007 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

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%; 27 March2019 or the fundamental outlook of the company or sector is neutral. 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%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. 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_DISCLOSUREOFINTERESTS OF INTERESTS ] (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 KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BANK OF GANSU (02139 HK),BINHAI INVESTMENT (02886 HK),VALUE A SHARE (03095 HK),CAM SCSMALLCAP (03157 HK),HAITIANTIAN (08227 HK),CSOP MSCI-R (CNY) (83149 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 (02007 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. 碧桂园 (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

Country Garden 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.

Report

Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 8 of 8