Trends to watch

The company’s current operations are in line with our expectation. The Rmb5bn of sales in 1Q accounts for 20% of our full-year forecast, and we still expect the company to hit the Rmb25bn sales target in 2012. However, it could suffer a 1~2ppt decline in net margin as the gross margins of its recently launched projects rerelatively low.

Valuation and recommendation

We maintain 2012/13e EPS at Rmb1.88/Rmb2.14. The stock is trading at 6.2x/5.4x 2012/13e P/E, implying a 61% discount to 2012e NAV. We like its rapid turnover business style, and consistent and strong sales may help the company show defensiveness in 2Q when the industry is expected to decline. Maintain BUY.