Report guide This report analyzes the competitive advantages of Yuanda Housing's B-side business from the R&D side and the production capacity side; discusses the company's C-side business growth logic from the policy side and product side; and analyzes the “A” fundraising project from the two perspectives of production capacity advantage and cost advantage. Key investment points Prefabricated buildings may enter a period of rapid growth. At this stage, China's prefabricated construction market is in its infancy, and the penetration rate is rapidly increasing at a low level. In 2019, the penetration rate of prefabricated buildings in China increased to 13.4%, +8pct over the same period last year. In the future, short-term policies will continue to catalyze, and market demand is expected to continue to rise; driven by the long-term cost side, labor costs in the construction industry will continue to increase as the demographic dividend disappears, and the cost advantages of factory-based prefabricated construction will gradually become prominent. Prefabricated buildings may enter a period of rapid growth. According to our forecast, in 2025 and 2030, the PC component market size for the corresponding years may be close to 230 billion yuan and 365 billion yuan, respectively. Yuanda Housing focuses on the PC assembly market, and the 2B+2C strategy is a two-wheel drive B-end business: the company's strategy focuses on PC component production and intelligent manufacturing R&D, and the engineering business is gradually being divested. Production capacity side: As a leader in the PC prefabricated industry, Yuanda Housing's direct-run factory had a production capacity of 1.665 million cubic meters in 2019. R&D side: 2017-20Q1. The company's R&D cost ratio remains in the high range of 7%-10%. The number of patent applications and main/participating industry standards is far ahead of the industry. With the completion of all engineering business orders, the company's main business will completely return to the “manufacturing industry.” C-side business: Taking advantage of the “separation of powers” policy for rural homesteads, it is expected to enter the trillion-dollar farmhouse construction market. In January 2018, the central government issued “Opinions on Implementing the Rural Revitalization Strategy”, which first proposed the “separation of powers” of rural homesteads: ownership, qualification, and usage rights are separated, and usage rights can be transferred into the market. The company launched the “Grand Beautiful Home” 2.0 series in 2020, covering high-end rural villas and cultural tourism housing. As the income of rural residents rises, the number of high-net-worth urban buyers returning to their hometowns increases, and various actors “bring capital into the village” as the “separation of powers” pilot gradually matures, the company's C-side business market will expand in the future. At the time of “Back to A”, the fund-raising project is expected to stabilize the company's leading position. On September 30, 2020, the company announced that the Shenzhen Stock Exchange had accepted the proposed A-share issuance application documents submitted by it. The return to A raised about 1,779 billion yuan, which was used respectively for: (1) B-side business: 480,000 cubic meters of PC component production capacity expansion and development of smart construction site systems; (2) C-side business: construction of 6 large beautiful housing exhibition centers, technical reform of B-BOX modular construction production lines; and (3) supplementary working capital. We believe that the fund-raising project will further consolidate the company's production capacity advantages and cost advantages, and stabilize the company's leading position: Capacity advantage: B-side capacity expansion combined with C-side business brings incremental demand for PC components, and the capacity utilization rate of self-operated factories is expected to be smoothed and increased. Cost advantage: The research and development results of smart construction sites may be linked with the PC-CPS system to create a full-process control system for prefabricated construction to better help flexible production and reduce manufacturing costs, which is expected to continue to increase the gross profit margin of the main business. The profit forecast and valuation fully consider that the company's B-side business has entered a stage of continuous expansion with the boom in PC prefabricated construction, the strategic contraction of the engineering contracting business, and the expected growth of the C-side business, we expect the company to achieve net profit of 688 million yuan, 958 million yuan and 1,290 million yuan respectively in 2020-2022, corresponding to current stock prices of 11.4 times, 8.2 times and 6.1 times, respectively. In terms of valuation, on the one hand, from the perspective of PEG valuation, the company's net profit CAGR for 2019-2022 was 23.99%, which is about 24.0 times the PE for 2021 when considering PEG = 1; on the other hand, select comparable companies in the prefabricated industry to calculate the average PE of 20.5 times and 16.5 times for 2020/2021, respectively. As a leader in the PC assembly industry, the company's current market value is only 11.4 times and 8.2 times that of PE in 2020/2021. The valuation is low. The current PE-TTM is 16.2 times, which is at a historical valuation level of 40%. Taking into account the PEG valuation, the relative valuation of comparable companies in the industry, and the company's own historical valuation, and the company's own historical valuation separately, we gave it an “increase in holdings” rating for the first time. Risks suggest that the penetration rate of PC prefabricated buildings has not increased as fast as expected; prices of raw materials such as cement and steel have risen; new orders for the C-side business have fallen short of expectations; and the growth rate of real estate investment has fallen short of expectations.