Event: when the company released its semi-annual report of 2021, its revenue in the first half of the year was 213 million yuan, down 43.97% from the same period last year; the net profit returned to its mother was-131 million yuan, down 660.45% from the same period last year. Comments are as follows:

The company's operating results suffered a loss for the first time, mainly due to a decrease in revenue from prefabricated construction parts and integrated services, a decrease in gross profit as a result of increased costs, and an increase in expenses during the period. In the first half of the year, the company's operating income fell 43.97% to 213 million yuan compared with the same period last year, and its net profit decreased by 660.45% to-131 million yuan, of which the company's operating income in the second quarter decreased by 78.6% to 65 million yuan compared with the same period last year, and its net profit decreased by 718% to-133 million yuan. 1) the number of newly signed orders for prefabricated building integration services projects decreased, resulting in a decline in business revenue.

At present, the current situation of high debt and high receivables has caused great operational pressure on the company. The company's main income comes from prefabricated building integrated service projects, but the project capital liquidity is poor. At present, it is difficult for the company to maintain the situation of stock project rebate to promote the development of new projects. Combined with the internal and external operating environment, the company actively adjusts its development ideas and implements a strict screening mechanism for projects with bidding intention. Select high-quality projects, take the initiative to abandon projects with higher comprehensive risk, resulting in a phased decline in newly signed orders compared with the same period last year. In the region, there are fewer stock orders and new construction projects in Beijing and Xinjiang, resulting in a year-on-year decline in business income in Beijing and Xinjiang.

2) the increase of operating cost in the first half of the year is greater than that of operating income, resulting in a decrease in gross profit margin. The company's gross profit margin in the first half of the year was-33.59%, down-62.79% from the same period last year, mainly due to the increase in operating costs caused by factors such as reduced revenue and rising prices of raw materials. 3) the company's management expenses and financial expenses increased by 21.65% and 47.35% respectively, mainly due to the increase in staff and workers' salaries and depreciation expenses in the first half of the year, as well as the increase in interest expenses in financial institutions.

The company is currently in a critical period of strategic transformation and upgrading, and will be laid out from prefabricated building integrated service projects, regional operation, brand building, team management, business structure, innovative R & D, and is expected to make a breakthrough in profitability in the future. 1) in terms of prefabricated building integrated service projects, the synergy between the company and China Rallway has not been fully released since it entered the China Rallway system in 2020. In the next step, the company will precipitate the market and customer demand, analyze the business in the upstream and downstream of the China Rallway system, and graft each industrial chain of China Rallway. At present, the company has docked with China Rallway's eight major areas, and will achieve in-depth exchanges and cooperation with the vertical field of prefabricated buildings in the system through the joint force of investment business and assembly integrated service business, and gradually explore the unique business development model of mixed reform enterprises. 2) in terms of regional operation, in the first half of 2021, the staffing of the regional marketing center established by the company was basically completed, and it was determined that it would focus on the economically developed regions such as Beijing, Tianjin, Hebei and the Yangtze River Delta. on the basis of focusing on all levels of investment platform companies in developed cities and major domestic design institutes, we will continue to enhance synergy with China Rallway's industrial chain, grasp the main line to carry out operation and management, and abandon the "edge, small, scattered" project.

At the same time, on the basis of the company's original overseas market, docking China Rallway overseas business platform, so that the company's assembled products and technology in a higher field "go out". However, at present, the regional centers are still in the early stage of establishment, and the market has not yet been fully opened. It is believed that with the further optimization and improvement of the market layout in the future, the management quality and results will gradually appear. 3) in terms of brand building, in the first half of 2021, the company adjusted product prices due to rising prices of commodity raw materials and increased labor costs, resulting in a decline in sales revenue of prefabricated construction parts. In view of the above problems, the company has carried out analysis and research, taking the market as the starting point, opening up the customer terminal demand chain, combining with its own business format, covering the category horizontally, reshaping the product structure, creating stars and leading products, and optimizing the product line. empower the company's brand, achieve the integration of quality and effect, sink the deep field of assembly architecture, and make star products and demonstration projects become the tipping point for business improvement. At the same time, strengthen the awareness of high-quality products, effectively strengthen the management of projects under construction, enhance the awareness of safety and quality, strictly control, quality traceability and process control, speed up the upgrading of service quality, and improve the quality of business work. 4) in terms of team management, the company introduced a large number of talents in the first half of 2021, and the management expenses increased compared with the same period last year. The company will deepen management reform, establish hierarchical classification, give professionals full room for development, maximize the ability to activate innovation, realize the echelon training of the company's talent team, promote the transformation of staff value, and promote the stable development of the enterprise. 5) in terms of business structure, the company will focus on developing "assembly +" business in the future, find out the differential positioning, and lay out the new infrastructure market, starting from the eight major systems of assembly interior. carry out modular design, industrial manufacturing, professional construction and fine management, layout of urban renewal and assembly decoration market, and actively open a new mode of wisdom transformation of the decoration industry.

6) in terms of innovation and research and development, the next step will be to enhance the ability of design research and development, focusing on the development of assembly technology system and enterprise standards. Relying on the assembly of China Railway, integrating the superior resources of relevant industries inside and outside the China Railway system, strengthening the design and R & D capability, focusing on the construction of the core technology system of the main structure of construction industrialization, and strengthening the mainstream prefabricated construction market, such as PC components, steel structure, integrated blocks and so on.

China Rallway is strong, and coordination is expected to accelerate. 1) estimated amount of daily related party transactions in 2021: on March 25, 2021, the company examined and passed the motion on the confirmation of daily related party transactions in 2020 and the forecast of daily related party transactions in 2021. The daily related party transactions expected to occur in 2021 include:

The contract for the sale of engineering construction and prefabricated construction parts signed to China Rallway and other enterprises under his control is 2.5 billion yuan, the estimated financial deposit and loan to China Railway are 1 billion yuan and 2 billion yuan, respectively. The estimated loan amount to China Railway Financial Leasing Co., Ltd. 2) the company's 2021 budget target: according to the company's financial accounts for 2020 and the company's business plan for 2021, the company's basic operating income target for 2021 is expected to grow by 0-56% year-on-year, and the goal is expected to grow by 0-102%. The basic target of net profit is expected to grow by 0-467% year-on-year, and the goal is expected to grow by 0-609% year-on-year.

Investment advice: maintain the overweight rating. The company's 2021-2023 net profit will be reduced to 0.5,0.8 and 100 million yuan, corresponding to the price-to-earnings ratio of 69,46 and 37 times PE. The prefabricated construction industry is currently supported by policies, and the industry is in a period of high growth. The company has strong technical and order-taking capabilities; after the controlling shareholder becomes China Rallway, it is expected to achieve business coordination and will actively build China Rallway's high-tech innovative assembly construction business platform.

Risk hints: policy support in the prefabricated construction industry is lower than expected; competition in the industry intensifies; downstream demand for prefabricated construction is lower than expected; raw material costs grow higher than expected; China Rallway brings lower-than-expected business support to the company; loss or aggravation of impairment of assets such as bad debts.