Company profile: The company was founded in 2006. The company's main products are prefabricated new wall materials, interior and exterior decoration materials, landscape materials, and integrated houses. The company completed the equity transfer in 2020. The actual controller changed from Sun Zhiqiang to China Railway, with a shareholding ratio of 26.51%. In 2019, integrated housing, trade, and integrated housing components accounted for 59%, 33%, and 7% of the company's revenue structure, respectively, and the three in the gross profit structure accounted for 93%, 1%, and 5%, respectively. Prefabricated construction industry: Policy support. The industry is in a period of high growth. Prefabricated construction saves labor, has a short construction period, but is more expensive. Higher cost is one of the main reasons limiting the development of prefabricated buildings. The unit cost of prefabricated steel structure houses is higher than that of prefabricated concrete; along with the increase in PC rates, unit costs have risen, labor costs per unit area have declined, and the proportion of labor costs in total construction and security costs has declined. The “Prefabricated Concrete Construction and Safety Project Cost Study” revealed three cases of prefabricated construction: the prefabricated cost of the Lugu Town project in Changsha is on par with the traditional cost; the prefabricated cost of the Feishi Lakeside New Town project is 7 to 8% higher than the traditional cost; the prefabricated cost of the Hefei Municipal Affairs Center parking complex project increased by 267 yuan/square meter, but it saved financial costs and showed economy. The policy supports the development of prefabricated buildings. In 2020/2025, the proportion of prefabricated buildings will reach 15%/30%, respectively. The 13th Five-Year Plan Target for Prefabricated Construction: By 2020, prefabricated buildings in the country will account for more than 15% of newly built buildings, with key promotion regions reaching more than 20%, and active promotion regions reaching more than 15%. The “Certain Opinions of the CPC Central Committee and the State Council on Further Strengthening the Management of Urban Planning and Construction” issued in February 2016 proposed that efforts should be made to increase the proportion of prefabricated buildings in about 10 years to 30% of newly built buildings. Some provinces have set targets for higher penetration rates. Local prefabricated support policies include: fiscal incentives, tax incentives, financial services, area incentives, priority allocation of construction land, etc. Prefabricated buildings are currently in a period of rapid development. The new construction area of prefabricated buildings in 2019 was 420 million square meters, an increase of 44.64% over last year. The compound growth rate over the past four years has reached 38.38%, while the penetration rate has reached 13.4%. Judging from the statistics of the past three years, the areas of newly started prefabricated construction in key promotion regions were 75.11 million square meters, 135.38 million square meters, and 19678 million square meters, respectively, accounting for 47.2%, 46.8%, and 47.1% of the country. Of the newly started prefabricated buildings in 2019, commercial housing was 170 million square meters, affordable housing was 0.6 million square meters, and public buildings were 0.9 million square meters, accounting for 40.7%, 14%, and 21% of newly started prefabricated buildings, respectively. According to statistics, in 2019, China had 2,483 production lines for precast concrete components, with a design capacity of 162 million square meters; 2,548 steel structural component production lines, with a design capacity of 54.23 million tons. The construction area of newly started assembly and decoration increased from 6.99 million square meters in 2018 to 45.29 million square meters in 2019. The evaluation standards for prefabricated buildings clearly state that the assembly rate is not less than 50%. The “Industrial Construction Evaluation Standard” was abolished, and the “Prefabricated Building Evaluation Standard” was implemented in February 2018. Prefabricated buildings should also meet the following requirements: the evaluation score of the main structural part is not less than 20 points; the evaluation score of the fence wall and internal partition wall part is not less than 10 points; full decoration is used; and the assembly rate is not less than 50%. Company business: The controlling shareholder became China Railway, with strong technology and order processing capabilities. The company's main products include two categories: prefabricated building components and integrated housing, with a complete industrial chain. In 2019, integrated housing, trade, and integrated housing components accounted for 59%, 33%, and 7% of the company's revenue structure, respectively, and the three in the gross profit structure accounted for 93%, 1%, and 5%, respectively. The Jiangsu Suqian production base was successfully put into operation in the first half of 2019, improving the production capacity layout. The total investment of the production base in Suqian, Jiangsu was 558.2676 million yuan, of which 450 million yuan was raised. All of the capital raised was invested in the project. The project forms an annual production capacity of 400,000 square meters of inorganic aggregate flame retardant wood-plastic composite wall panels, 600,000 square meters of fiber-reinforced cement composite wall panels, 2 million square meters of exterior wall panels, 15,000 tons of wood-plastic decorative materials, 10,000 tons of steel structures, and 500,000 square meters of other components for prefabricated buildings. According to statistics, the Suqian base achieved revenue of 278.924,700 yuan in 2019, accounting for 29.23% of the company's revenue in 2019. According to information disclosed in the December 2017 allotment note, after the implementation of this project is completed, it can achieve sales revenue of 38,38974 million yuan, total profit of 66.882 million yuan, and net profit of 50,1662 million yuan; after the project is put into operation, 60% of the design production capacity in the first year, 80% of the design production capacity in the second year, and production in the third year. The company's current business scope covers Beijing, Jiangsu, Xinjiang, Shandong and other places. The commencement of production at the Jiangsu Suqian production base marks a further increase in the company's manufacturing capacity. It has strong technical capabilities and participated in the editor-in-chief of industry standards. It is the first batch of prefabricated construction industry bases certified by the Ministry of Housing and Construction. In 2019, the “Technical Regulations for the Application of Inorganic Aggregate Flame Retardant Wood-plastic Composite Wall Panels for Construction” (CECS286) and the co-edited “Technical Standards for Prefabricated Steel Structure Construction” (GB/T51232) were included in the “Beijing Green Building and Prefabricated Building Application Technology Promotion Catalogue (2019) by the Beijing Municipal Housing and Construction Commission. The company not only produces prefabricated building parts and components, but also provides comprehensive solutions, and is the first batch of prefabricated construction industry bases certified by the Ministry of Housing and Construction. It has a strong ability to receive orders and has received orders for rural revitalization in Xiong'an New Area. As mentioned in the 2019 State Council Report on the Work of the Government, it is mentioned that rural construction will be steadily promoted. Scientifically prepare and implement construction plans, and vigorously improve production and living conditions. Continue to promote the rehabilitation of dilapidated houses in rural areas. The revenue of rural revitalization and toilet revolution projects undertaken by the company in 2019 was 206.676 million yuan, accounting for 21.66% of total revenue in 2019. The company undertook construction projects in Xiong'an New Area. Among them, the Xiong'an New Area Builder's Home Camp No. 1 project completed 16,000 square meters of prefabricated steel structure in just 8 days. The controlling shareholder became China Railway, which is expected to achieve business collaboration. On July 14, 2020, the subject shares transferred by the agreement on the change of control have completed the transfer procedure, and the controlling shareholder of the company was changed to China Railway. On August 1, 2020, the company announced that it intends to change the company's abbreviation to China Railway Assembly. The current valuation of China Railway Assembly is higher than the average of comparable companies. Judging from the valuation situation of comparable companies, the PE of China Railway Assembly from 2020 to 2021 was 61 and 46 times, respectively, which were higher than the average of comparable companies. Investment advice: Give an increase in holdings rating for the first time. The company's net profit from 2020 to 2022 is expected to reach 0.82, 1.08, and 143 million yuan respectively, up 22%, 32%, and 32% year on year, corresponding to price-earnings ratios of 61, 46, and 35 times. The prefabricated construction industry is currently supported by policies, and the industry is in a period of high growth. The company's production base in Suqian, Jiangsu was successfully put into operation in the first half of 2019, improving production capacity layout. The company's technology and ability to receive orders are strong; after the controlling shareholder becomes China Railway, it is expected that business collaboration will be achieved. Risk warning: Policy support for the prefabricated construction industry falls short of expectations; industry competition intensifies; downstream demand for prefabricated construction falls short of expectations; raw material cost growth is higher than expected; business support brought to the company by China Railway falls short of expectations; impairment losses or intensification of assets such as bad debts.