A Strong First-Half Performance on Better Margin for Poly Developments

Poly Development reported first-half results with revenue and attributable earnings of CNY 71 billion and CNY 9.7 billion, respectively. The top line was up 19% compared with the same period a year ago, and earnings were up 51%. The earnings growth was attributed to a higher margin and a smaller proportion of minority interest. We raised our margin assumption, resulting in earnings higher by 7% and 3% in 2019 and 2020. We increase our fair value estimate to CNY 16 from CNY 15, along with our no-moat rating for the company. We believe the shares are now fairly valued at this point as we require a greater margin of safety given the company's business volatility.