Incidents:

The company published its 2021 annual report and 2022 quarterly report. In 2021, it achieved revenue of 2,801 million yuan, an increase of 23.17%; net profit of 100 million yuan, an increase of 42.95%; net profit of non-return net profit of 47.21 million yuan, a year-on-year decrease of 34.36%. In the first quarter of 2022, we achieved operating income of 519 million yuan, net profit of 14.26 million yuan to parent, and 1.04 million yuan after deducting net profit not attributable to parent.

Comments:

EPC's general contracting business is developing rapidly, supporting steady revenue growth. In 2021, in the face of the complex and changing internal and external situation, the company insisted on steady progress and achieved steady development. EPC's general contracting/design business/other business achieved revenue of 885 million yuan/1,900 million yuan/16.44 million yuan, respectively, with a year-on-year increase or decrease of -0.34%/+39.99%/-43.72%. By region, within Zhejiang Province and outside Zhejiang Province achieved revenue of 2,535 million yuan/266 million yuan respectively, with a year-on-year increase or decrease of +27.12%/-4.98%, respectively. Revenue for the first quarter of 2022 was basically the same year over year, mainly due to the higher base for 2021.

Investment income supported a high increase in net profit in 2021, under pressure due to bad debts and increased R&D investment, deducting non-net profit. The company achieved a high increase in net profit after deducting non-attributable net profit in 2021, mainly due to the fact that 56.59 million yuan of net profit was received from investment income distributed by partnerships and investment income generated from disposal of transactional financial assets. Due to the credit risk of downstream real estate agents, the company made extensive preparations for bad debts in 2021. The total annual credit impairment loss was 38.9 million yuan, an increase of 9.15 million yuan over 2020. In terms of R&D expenses, the company invested 88.16 million yuan in 2021, an increase of 29.3% over the previous year, an increase of about 20 million yuan. Affected by large amounts of bad debts and increased R&D expenses, the company's non-net profit deducted in 2021 was under pressure.

Soft power is gradually improving, and overall competitiveness is increasing. In 2021, the company and its subsidiaries obtained a number of qualifications, including grade A for urban and rural planning and preparation, actively participated in the preparation of industry standards and subject research, won many awards from Zhejiang Province and Hangzhou, further enriched the scope of business, and enhanced brand value and influence.

Give the company a “buy” rating. According to the company's actual performance adjusted profit forecast, the EPS from 2022 to 2024 is expected to be 0.51/0.60/0.69 yuan, and the corresponding PE is 20.91/17.64/15.31 times.

Risk warning: Company performance is not as good as expected, accounts receivable repayment risk, macroeconomic risk