Yuzhou Properties : JP Morgan initiated Coverage of Yuzhou Properties(01628.HK) with an Overweight rating and a Target Price of HK$8.5

[For Immediate Release]

JP Morgan initiated Coverage of Yuzhou Properties(01628.HK)

with an Overweight rating and a Target Price of HK$8.5

(31th May, 2018, Hong Kong) Chinese Real Estate Industry Top 40 Company, Yuzhou Properties Company Limited ("Yuzhou Properties" or the "Company", together with its subsidiaries referred to as the "Group"; stock code: 01628.HK) is pleased to announce that J.P.Morgan initiated coverage of Yuzhou Properties with an Overweight rating and a price target of HK$8.50 based on 6.5x average FY18E/19E P/E, implying 55% upside potential.

Originally focused in Fujian and Eastern China, Yuzhou has recently entered a new stage of national expansion. Greater than 14% net margin, >20% ROE, 7% yield, >30% earnings CAGR and <80% gearing add up to a compelling investment case in J.P.Morgan's view. J.P.Morgan thinks the growth outlook is becoming more visible, particularly after asset acquisition from Coastal Greenland.

Sustainable high-quality earnings

Yuzhou has consistently delivered strong margins (35% gross & 15% net in FY17) that have outperformed peers. J.P.Morgan believes margin outperformance is sustainable due to defensive geographical positioning in six metropolises, strong land-banking ability and good cost control (SG&A as % of contracted sales is 2.5%, much lower than that of peers').

J.P.Morgan expects margins to stay strong at >30% (gross pre-LAT) and >14% (core net pre-MI & JCE) till FY20E, and earnings growth is estimated at 34% CAGR till 20E, thanks to its ~50% attributable sales CAGR in FY16-18E. Despite the strong growth, net gearing has been kept at <80%, showing strong balance sheet discipline.

Proven strong land-banking ability to sustain growth

J.P.Morgan thinks Yuzhou stands out against a backdrop of surging land prices & market consolidation, as it sees strong competence in sourcing, and most importantly, closing M&A deals. J.P.Morgan attributes this to the hands-on approach of the management team led by Chairman Lam leveraging extensive network of Yuzhou Properties. J.P. Morgan expects more similar deals to follow and this core edge should allow Yuzhou to sustainably expand its land bank in the medium & long term.

Attractive valuation

Yuzhou is trading at 4.3x 12-month forward P/E (or 4.9x 2018E P/E), among the cheapest in the sector despite the strong fundamentals and attractive valuation. J.P.Morgan expects

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accelerated sales momentum and more proof on strong land-banking to raise the perception on long-term growth and earnings trajectory.

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About Yuzhou Properties Company Limited（01628.HK）

Established in 1994, Yuzhou Properties is a property developer headquartered in Shanghai with a national foothold. Adhering to its strategy of Cultivating in Regions Leading the Market, Yuzhou Properties strives to develop residential and commercial properties which align with market trends in first-and second-tier cities. As at 31 December 2017, the Company had 92 projects under various stages of development in Xiamen, Fuzhou, Shanghai, Tianjin, Nanjing, Hefei, Hangzhou, Suzhou, Yangzhou, Quanzhou, Zhangzhou, Longyan, Bengbu, Huizhou, Hong Kong and so on. It had an over 11.84 million sq.m. in aggregate GFA under development or held for future development, with Yangtze River Delta Region, West Strait Economic Zone, Bohai Rim Region, Central Region, Bay Area accounting of 51.7%, 29.0%, 10.8%, 5.1% and 3.4% respectively, of the total. Renowned for its outstanding product quality, diversified product portfolio, strong brand awareness and seasoned management team, Yuzhou Properties has been named "Top 100 China Real Estate Enterprises" for eleven years in a row; and Top 50 China Real Estate Enterprises from 2011 to 2017. In 2018, Yuzhou Properties was Incorporated into the Hang Seng Composite LargeCap & MidCap Index as well as the Shanghai-Hong Kong Stock Connect program and has been selected as the constituent of MSCI China Index.

For more information about Yuzhou Properties, please visit the Company's website:http://www.yuzhou-group.com.

For inquiries, please contact:

Yuzhou Properties Company Limited (HKEX: 01628)

Head / Senior Manager / Senior Manager/ Assistant Manager Finance & Investor Relations

Camille Xiong / Shikai Wu / Summer Guo / Jessica Li

Tel: (852) 2508 1718

Fax: (852) 2510 0265

Email:ir@yuzhou-group.com

Yuzhou Properties QR Code:

Media enquires:

Wonderful Sky Financial Group Holdings Limited (HKEX: 01260) Julia liang

Tel: (852) 3970 2161

Fax: (852) 2598 1588 Email:yuzhou@wsfg.hk

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