Renovation and decoration contracts grew steadily in '19. New decoration contracts of 6.761 billion yuan were signed in 2019, using property management as an entry point for the renovation and layout of old urban neighborhoods, an increase of 15.53%. The growth rate declined slightly from 2018 (32.94%), mainly due to the signing of new contracts of 4.534 billion yuan in the public decoration business, which accounted for the largest share, an increase of 3.14% over the same period, a year-on-year decrease of 23.83 percentage points. With the deepening of the construction of new urbanization and the renovation of old neighborhoods, cooperation between the company and real estate agents increased, and the number of new orders signed in the residential renovation business also increased rapidly by 65.98%, reaching 1,887 billion yuan. In the first quarter of 2020, 964 million yuan of new decoration contracts were signed, a decrease of 22.32%. In 2020, the company will use property management as an entry point and move towards the renovation of old neighborhoods, which is expected to provide new growth momentum for related businesses. Revenue grew rapidly in 2019, and the decline in the first quarter of '20 was in line with expectations; due to changes in accounting caliber, gross margin increased sharply to 4.859 billion yuan in 2019, an increase of 17.21%. Among them, revenue from the main decoration construction business was 4.667 billion yuan, an increase of 18.14%. The company's revenue growth rate has exceeded 17% for three consecutive years, and the growth momentum is stable and good. In 2019, the company's gross profit margin was 17.28%, an increase of 2.70 percentage points. Mainly due to changes in accounting standards, some of the original operating costs were moved into the R&D expenses list. If consistent accounting standards were maintained, the gross margin did not change much. Affected by the epidemic, the company's revenue in the first quarter of 2020 was 559 million yuan, a decrease of 35.25%; gross profit margin was 17.37%, an increase of 0.59 percentage points. In 2019, in response to the large number of upstream small and medium-sized enterprises and difficult financing, the company increased investment in blockchain technology and improved supply chain finance, and has implemented blockchain-based loans one after another. The company believes that in 2020, there is a high degree of certainty that it will continue to receive technical dividends and achieve the operating target of 15% to 30% year-on-year increase in revenue. Expense rate for the 19-year period increased due to adjustments in accounting standards; 20-year net profit target growth rate of 15%-30%, the company's expense rate for the 2019 period was 8.44%, an increase of 3.08 percentage points, mainly due to changes in accounting standards and investment in blockchain technology, which increased 2.84 percentage points to 3.12%; sales expense ratio 0.95%, which was basically unchanged; management fee ratio 2.48%, slightly increased by 0.09 percentage points; the financial expense ratio increased by 0.15 percentage points, mainly due to the increase in interest on bill discounts There is a certain financial pressure. The net interest rate returned to mother in 2019 was 5.10%, an increase of 1.07 percentage points, mainly due to the company's strengthening of project management and control, and a decrease in the share of asset impairment, compounded by tax benefits brought about by the increase in R&D expenses. Affected by the COVID-19 pandemic, the fee rate for the first quarter of 2020 was 13.10%, an increase of 4.27 percentage points; the net interest rate to mother was 2.97%, a decrease of 0.71 percentage points. The company will use blockchain technology to ease capital pressure on upstream enterprises. This move is expected to further improve the efficiency of capital utilization. In 2020, the company plans to achieve the operating target of a 15% to 30% year-on-year increase in net profit. The cash flow situation improved markedly in '19; convertible bonds were successfully converted to shares, effectively reducing the balance ratio by 0.90, down 0.03 percentage points; the payout ratio was 0.95 million yuan, down 0.11 percentage points; net operating cash flow increased by 126.87%, mainly because the company strengthened project payment collection and increased payment settlement methods; the year-end balance ratio was 52.38%, a decrease of 1.84 percentage points, mainly due to the company's issuance of 525 million yuan of convertible bonds in the first quarter of 2019, a decrease of 1.84 percentage points. The revenue ratio for the first quarter of 2020 was 1.28, the payout ratio was 1.90, and the net operating cash flow outflow was 285 million yuan; the debt ratio was 49.30%, mainly due to the increase in project cost payments and the rapid decline in accounts payable in the current period. Investment advice The company actively increased investment in technology in 2019, and has successively achieved results in blockchain and IDC businesses; convertible bonds have been successfully converted to shares to reduce financing costs, and more measures have been taken to improve operating efficiency. Due to the increase in total share capital transferred to shares and the impact of the epidemic, we slightly adjusted the EPS forecast for 2020-2021 to 0.44 and 0.54 yuan/share (originally 0.49, 0.59 yuan/share), and added the 2022 EPS forecast of 0.70 yuan/share, corresponding PE of 24, 20, 15 times, and maintained a “buy” rating. Risk warning: The renovation layout of old neighborhoods lags behind expectations; blockchain technology research and development risks; the upgrading of decoration consumption is slowing down