Jan contracted sales +52% YoY to Rmb11bn; contracted ASP +25% YoY。

Evergrande announced contracted sales +52% YoY to Rmb11.04bn in Jan-14,achieving 10% of its FY14 target of Rmb110bn. Meanwhile, contracted GFAsold increased by 22% YoY to 1.43mn sqm and contracted ASP saw a markedincrease of 25% YoY to Rmb7,738/sqm.

Contracted sales momentum resumed strength in Jan。

Stepping into 2014, contracted sales momentum saw a marked picked up inJan-14 following a brief slowdown in Dec-13, where Evergrande slowed downits sale pace on the back of an early completion of its FY13 sales target by end-Nov. In particular, contracted sales by value and GFA surged by 448% MoMand 397% MoM, respectively.

On the other hand, contracted ASP also saw a marked increase in Jan-14,firming by 25% YoY and 10% MoM to Rmb7,738/sqm, some 15% higher thanthe average of HK$6,741/sqm achieved in 2013. In our view, the markedincrease in contracted ASP should translate into a corresponding strongrecovery in profit margins ahead.

FY14 contracted sales target of Rmb110bn, implying 10% YoY growth。

Evergrande’s FY14 contracted sales target of Rmb110bn, implying a YoYgrowth rate of 10%. With more than 260 projects over 140 cities (of whichover 200 projects were on-sale by end-13), we believe it is an achievable andconservative target. Moreover, given the company has a good track record ofover-achieving its sales target (i.e. Evergrande has over-achieved its full-yearsales target by 26% in 2010, and by 15% in each of 2011 and 2012), theremight be a possibility for over-achievement in 2014. Hence, the currentguidance should not be viewed as a cap to the actual sales performance in2014.

Currently trading at 58% discount to NAV。

Evergrande is currently trading at 58% discount to our estimated NAV. Ourtarget price is based on a 30% discount to our NAV estimate of HK$7.51/shr.

Our target discount reflects a slower contracted sales momentum, which hasbeen a key catalyst for the re-rating of the stock over the past two years. Ourtarget discount is also higher than that of industry leaders due to its shorterlisting history. The key risk is further tightening policies aimed at the propertysector.

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