Longfor delivered stronger-than-expected 1H16 rental income of Rmb883 mn (+34% YoY) with an improving GP margin of 74% (+3 pp YoY) amid higher occupancy rate of 96% (+3.6 pp YoY). We expect FY16E rental to reach Rmb2 bn, which would help strengthen its cash flow position and support its dividend growth. Overall, interim result was satisfactory with core profit and EPS up 7.7% and 7.3% YoY to Rmb2.4 bn and Rmb0.41, respectively. Development GP margin gradually improved by 0.8 pp YoY to 25.8% while net gearing remained healthy at 71.3%. Longfor revised up its full-year contracted sales target by 21% to Rmb75 bn given a better sell-through rate of 60% amid increasing saleable resource of Rmb125 bn. With intact pre-sales margin at 26%, we revise our FY16E/17E/18E EPS by +2.2%/+5.9%/+2.6%. We revise up our estimated end-2016E NAV by 10% to HK$22.8 due to better-than-expected margin in both residential and commercial property development. We revise our TP to HK$13.7 (from HK$12.4) based on the same 40% NAV discount but maintain our OUTPERFORM rating.