Poly Developments 1Q Earnings in Line, but Slow Sales Stretching the Balance Sheet

Poly Developments and Holdings Group reported first-quarter revenue and earnings of CNY 23.8 billion and CNY 2.4 billion, respectively. The top line and earnings were up 6% and 3% year on year. First-quarter results accounted for 8% of our full-year revenue and earnings estimates, in line with the run rate seen a year ago. However, slow contract sales during the quarter pushed net gearing up to 71%, highlighting the balance sheet risk the company has struggled with. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. The shares are fully valued at this point.