Main points of investment

The company released its annual results for 2020: revenue was 2.511 billion yuan, down 21.5% from the same period last year; gross profit was 912 million yuan, down 17.2% from the same period last year; profit was 219 million yuan, down 66.7% from the same period last year; no dividend was paid.

Our comments are as follows:

The epidemic affected the entry of equipment into the plant, the equipment revenue fell sharply by 90% to 92 million, the construction business has been officially spun off, and the revenue has dropped sharply by 39% to 103 million. During the severe epidemic in the first half of last year, the company was cautious about newly signed orders, which led to the slower-than-expected growth of the main business of PC for the whole year, and the revenue of PC components only increased by 5% to 2.42 billion yuan.

(1) the effective production capacity of PC components reached 2.11 million cubic meters, an increase of 25.4% over the same period last year. Sales of PC components were 87.2 million cubic meters, an increase of 7.0 percent over the same period last year, and capacity utilization was 37.8 percent. (2) the average price of PC components decreased slightly by 1.8% compared with the same period last year. Unilateral cost of PC components decreased by 4.7%. The gross margin of PC components increased by 2.0ppt to 36.6% compared with the same period last year. (3) the PC component account period has increased significantly, from 204days in the same period last year to 290days.

Another important reason for the sharp decline in profits is the significant reduction in the "loss of income related to the significant influence of associates], which is an one-time non-cash gain resulting from the adjustment of the bookkeeping methods of associates, it has nothing to do with the state of operation of the main business. Excluding this subject and other non-main business profits, the core main business profit of PC in 2020 is about 120 million (2019: about 198 million), yoy-40%.

With the delayed payment, there was a net cash inflow of 182 million yuan from operating activities in the past 20 years, a decrease of 81.2% compared with the same period last year.

The company signs a substantial increase in contracts, laying the foundation for high performance growth in 2021, and the company guides that PC business revenue will achieve a high growth of more than 80% in 2021 (excluding module product revenue). At the same time, after more than half a year of exploration, Banda Mansion business will continue to promote, B-BOX module construction is also about to mass production, B2C business is expected to make a breakthrough, and get large-scale development in 2022.

Our point of view: Yuanda Housing is the market pioneer of China's assembly construction industry, has accumulated a wealth of technology and experience, B-side economies of scale is significant, C-side business has the potential to break out. We next revise the profit forecast, the estimated revenue in 2021-2023 is 45.24 / 55.26 / 6.817 billion (not considering modular construction for the time being), yoy+80.2%\ + 22.2% / 23.3%, net profit is 4.09\ 5.22\ 656 million yuan, yoy+86.5%\ + 27.6%\ + 25.7% respectively, downgraded to "prudent overweight" rating, with a target price of HK $25, we will continue to track the potential of Broad in C-end.

Risk tips: policy risk, account risk, the risk of intensified PC competition, the expansion of the United States housing market is not as expected.