At present, the Company has two land development projects: Guilong Project and Meilin Checkpoint Renewal Project. Since 2012, the Group has auctioned a total of 3,005 mu of land for the project in Longli, including 2,770 mu for the Guilong Project and 235 mu for the Duohua Bridge Project. As at the end of 2018, about 800 mu of land in the Guilong Project has been sold and transferred, and the funds recovered totaled about RMB330 million. In May 2019, another 810 mu of land was sold. About 1,045 mu of land in the Guilong Project is independently developed by the Group. The development of 300 mu in Phase I has been completed, and about 316 villas have been basically delivered, with a recognized revenue of RMB679 million. The Phase II covers an area of 389 mu, in which 238 villas of Stage I Phase II have been sold and have been delivered at the end of 2018. The Stage II of Phase II of the project is mainly for commercial supporting properties, in which 71 commercial properties were planned to be released. As at April 2019, 40 commercial properties have been sold and payments have been collected, which are expected to be completed and delivered in the first half of 2019. The Phase III covers approximately 229 mu, in which 271 villas of Stage I Phase III were opened for sale in July 2018. As at April 2019, 169 villas of Stage I Phase III have been sold and payments have been collected, and are expected to be completed and delivered by the end of 2020. It is expected that the subsequent selling price will increase year on year, the cost will decline, and the gross margin will further increase. In the future, depending on the overall market situation and development opportunities, the Company will timely realize the market value of the land held by means of market transfer, cooperation or independent development. The Meilin Checkpoint Renewal Project is divided into three phases including "Hefengxuan, Heyaxuan and Hesongxuan" for development, which will constitute a complex of approximately 486,400 square meters, covering residential, office, apartment and commercial buildings. Phase I "Hefengxuan" covers a land area of about 117,000 square meters, including 75,000 square meters of saleable houses, which were officially open for sale on 15 December 2018. As at May 2019, the cumulative removal rate of Phase I was around 80%. The project site is in a superior location. The land development projects that the Company is currently involved in are all related to toll highway. Participating in these projects is conducive to realizing the value of the Company's existing resources.

Based on the reasonable analysis and expectation on our operating environment and operating conditions, the Group has set a total revenue target for 2019 of not less than RMB5,809 million, with the total of operating costs, management expenses and selling expenses (excluding depreciation and amortization) of approximately RMB2,236 million. In 2019, it is expected that the average borrowing scale and the financial cost of the Group will increase on a YOY basis. From the disclosed data, the overall operating situation of the Company is basically in line with expectations. As the Three Projects were repurchased by the government, it is expected that the Group‘s toll revenue from the Three Projects will be reduced by RMB700~800 million in 2019. For the toll highway projects with long service years, such as the Jihe Expressway, Meiguan Expressway and Qinglian Expressway, the organic growth rate will slow down in the future, and it is expected that the toll revenue will maintain single-digit growth; projects with short service years such as the Coastal Project are expected to maintain double-digit growth due to the rapid growth rate and the continuous improvement of the surrounding road network. In addition, the Outer Ring Project is scheduled to be completed in 2020, which will contribute to the Company's toll revenue in the future. According to the Company's business development plan, Jihe Expressway will be expanded. The reconstruction and expansion will not only extend the concession, but also greatly enhance the capacity and promote the growth of traffic flow. The Company will also acquire mature and high-quality toll highway projects that are, in principle, located along the national main trunk lines with synergistic effects with existing projects, and an IRR of not less than 8%. Shenzhen Expressway has formed the capacity and foundation for sustainable development in toll highway business.

In November 2018, the government bought back the Fee Entitlement Right of the Three Projects. Since then, the Company no longer owns the toll revenue of the Three Projects and no longer bears the corresponding management and maintenance cost. In the past three years, the average annual operating profit of the Three Projects was approximately RMB320 million, and the average annual financial expenses caused by the government compensation of the Three Projects were approximately RMB330 million. The two basically hedged. In the past three years, the Company has achieved remarkable results in consolidating and enhancing the toll highway core business. The Company has successively obtained the construction and operation rights of Outer Ring Project, increased the 45% equity of Wuhuang Expressway to 100% equity, acquired 100% equity of Yichang Expressway, and acquired Coastal Project. The newly added consolidated equity interest mileage is approximately 209 km, which effectively compensates for the 76 km of mileage reduced after the buyback of the Three Projects and greatly increased the equity interest mileage of the total toll roads. Meanwhile, the Company also actively developed its environmental protection business. In 2017, the Company successfully acquired 20% equity interest of Derun Environment and 15% equity interest of Shenzhen Water Planning Company. Derun Environment contributed the investment income of RMB162 million in 2018. In the future, the new toll road projects and environmental protection business will continue to contribute the stable income to the Company and support the Company's long-term development.

The current traffic volume of Jihe Expressway is saturated. In order to ensure road safety, improve traffic efficiency, enhance project profitability, and form a perfect road network effect with the Outer Ring Expressway and the Shenzhen-Zhongshan Bridge, the Company plans to reconstruct and expand the Jihe Express. The Company has strengthened the coordination with the Shenzhen Municipal Government, and is currently carrying out the preparatory work for the project, including the feasibility plan and preliminary design, striving to commence construction at the end of 2020. The project's construction period is about four years, which is expected to be open to traffic in 2024 together with the Shenzhen-Zhongshan Bridge currently under construction. According to the current plan, the reconstruction and expansion of Jihe Expressway will be carried out according to the two-way six-lane, three-dimensional and double-layer structure. The Company is discussing with the relevant departments of the Shenzhen government, and will draw up investment and financing programs in line with the Company's project IRR with reference to the PPP model of the Outer Ring Project and in accordance with the principle of marketization. The Company will apply for an extension of the toll charging period in accordance with the principle of reasonable return. The construction of the reconstruction and expansion project of Jihe Expressway will not be fully enclosed, which will not have much impact on traffic flow and toll revenue. The Company will rationally arrange the construction plans and traffic organization plans, and improve construction efficiency and safety management efficiency to minimize the impact on traffic flow. In addition, the Company will also reasonably arrange construction progress and coordinate with the timing of opening for the traffic of the Outer Ring Expressway to divert the current traffic flow to the Outer Ring Expressway, so that the overall traffic flow of the east-west passage will not be affected.