Event: The company released its 2020 quarterly report. During the reporting period, the company achieved operating income of 19.52 billion yuan, a year-on-year increase of 89.6%; net profit of 2.89 billion yuan, a year-on-year decrease of 2.6%; and basic earnings per share of 0.95 yuan, a year-on-year decrease of 2.1%. Revenue has increased, profits have declined, and real estate settlement area has soared. The company's revenue for the first quarter increased 89.6% year on year, net profit decreased 2.6% year on year, revenue increased sharply, and performance declined slightly. The main reasons were: 1) gross margin fell 22.9% to 42.4% year on year, mainly due to the high Q1 gross margin base in 2019 and a sharp increase of 265.1% in the settlement area of the real estate development business with relatively low gross margin in 2010; 2) Increased interest-bearing debt and some interest that did not meet capitalization conditions led to a 180% year-on-year increase in financial expenses; 3) Increased real estate business settlement caused taxes and surcharges A year-on-year increase of 146.67%. As of the end of the reporting period, the company's advance payments and contract liabilities totaled 121.53 billion yuan, a year-on-year decrease of 16.6%, covering 1.16 times the revenue in 2019. Peacock City's sales are under pressure, and the cash return rate has increased. In the first quarter, the company's sales area fell 76.9% year on year to 75,000 square meters, and corresponding sales fell 48.4% year on year to 15.77 billion yuan, of which real estate development contract sales fell 78.8% year on year to 4.94 billion yuan, industrial park settlement revenue increased 56.5% year on year to 9.96 billion yuan, and sales of other businesses (property and hotels, etc.) increased 3.2% year on year to 880 million yuan. Sales pressure was mainly affected by the impact of the epidemic and the company's insufficient land acquisition in Peacock City in 2017 and 2018. As of the end of the reporting period, the company held 5.625 million square meters of land to be developed, an increase of 5.2% over the previous year; the planned construction area was 1,0453 million square meters, an increase of 5.3% over the previous year. In terms of repayment, in the first quarter, the company received 11.5 billion yuan in cash from product sales and labor services, a year-on-year decrease of 26.5%; the cash inflow from operating activities was 11.99 billion yuan, a decrease of 25.8% over the previous year, and the overall repayment rate of cash flow increased to 76%. The debt ratio declined year over year, and the financial situation is expected to improve. As of the end of the reporting period, the company's balance ratio was 83.6%, down 3.7 percentage points from the previous year and 0.3 percentage points from the end of 2019; the net debt ratio was 194.8%, down 6.5 percentage points year on year and up 10.2 percentage points from the end of 2019. The leverage level declined slightly year on year but remained high. The company's monetary capital was 46.44 billion yuan, a decrease of 2.2% over the previous year, which is 0.62 times the short-term loans and non-current liabilities maturing within one year. In the future, as the repayment capacity of the new industrial city increases and Ping An can provide financial support to the company through various channels after investing in shares, the company's financial situation is expected to continue to improve. Profit forecast. We forecast that the company's revenue growth rate for 20/21/22 will be 23.6%/16.1%/12.4%, and net profit will be 174/186/19.6 billion yuan, with growth rates of 19.1%/7%/5.5%, respectively. As of April 30, 2020, the company closed at 23.94 yuan, and the corresponding PE was 3.6/3.4/3.2 times, maintaining the “buy” rating. Risk warning: Settlement progress fell short of expectations, and real estate regulation policies exceeded expectations.