Matters: the company announced that it intends to grant 7.2884 million restricted shares to Zeng Fanwei, Zhao Haifeng and other incentive targets, accounting for 1.01% of the company's total share capital, with a grant price of 3.64 yuan per share. The stock is derived from the A shares of the company repurchased through the secondary market.

Equity incentives cover a wide range of areas, contributing to the company's strategic transformation and performance growth. The 2020 restricted stock incentive plan launched by the company covers a wide range of areas, including Zeng Fanwei Vice President and Chief Financial Officer, Zhao Haifeng Vice President, Yu Guitian Vice President and Secretary of the Board, and so on. It also includes 125 core managers and core technical (business) personnel, encouraging 131 people, accounting for about 10% of the company's total employees. The introduction of the restricted stock incentive plan further improves the company's long-term incentive mechanism, which is conducive to attracting and retaining outstanding talents, arousing the enthusiasm of the incentive object, and combining the interests of shareholders, the company and employees. Help the company's strategic transformation and performance growth.

The exercise conditions are relatively high, and the performance release is expected to be accelerated. The company takes the growth of operating income as the exercise condition of the restricted stock, and the performance assessment at the company level shows that the growth of operating income in 2021-2023 is 25%, 56% and 95% respectively compared with 2020, and the average annual growth rate of operating income is not less than 25%. Under the condition of exercising power at the company level, the individual assessment can exercise 100% of the right only if it reaches An or B, and the condition of individual exercise is relatively high. In recent years, the company's gross profit margin and net profit margin continue to rise, with the company's strategic transformation and the growth of emerging business, the company's gross profit margin and net profit margin are likely to further improve. It is expected that the company's net profit will grow faster than operating income in the next three years, and the performance release is expected to accelerate.

Convertible bond financing has been launched again, and the strategic transformation has progressed steadily. In October 2020, the company launched a pre-plan for the issuance of convertible bonds, with a planned financing of no more than 1.16 billion yuan, which is intended to be used for construction projects, Wusha (Kuanyuan) big data Center and replenishment. Convertible bond financing is expected to be completed in the first half of 2020. the availability of convertible bond financing funds will help the company's performance release. At the same time, the company will increase its IDC business through convertible bond financing, and the construction of Wusha (Kuanyuan) big data Center will accelerate the company's transformation to the IDC field. In addition, the company is actively transforming to the blockchain, and the smart chain has been successfully put into operation. On December 11, 2020, the intelligent chain platform of smart chain opened the first bank block chain to pay the order, and the blockchain business officially set sail, and the future development is worth looking forward to.

Investment suggestion: the company's operating income from 2020 to 2022 is expected to be 6.073 billion yuan, 7.41 billion yuan and 8.892 billion yuan respectively, up 25.0%, 22.0% and 20.0% respectively over the same period last year; net profit is 307 million yuan, 408 million yuan and 503 million yuan respectively, up 24.0%, 33.0% and 23.1% respectively over the same period last year; earnings per share are 0.43 yuan, 0.57 yuan and 0.70 yuan respectively. The dynamic PE of the company is 15.6,11.7 and 9.5 times respectively, and the PB is 1.5,1.3,1.2 times respectively. The company's main decoration industry is growing steadily, emphasizing the empowerment of science and technology, and is determined to become the first unit of decoration technology. While focusing on the main business, the company is actively transforming to IDC, block chain and property management, and the new business is worth looking forward to. The company launched an equity incentive program to maximize the enthusiasm of employees and consolidate the foundation of the company's growth. Be optimistic about the growth of the company and the improvement of the valuation of the new business, and maintain the "buy-A" rating with a target price of 9.6 yuan.

Risk tips: performance is not as expected, order growth is slow, transformation is lower than expected, refinancing is blocked and so on.