Event: the company released its 2020 annual performance report. The company achieved an operating income of 8.376 billion yuan, an increase of 34.68% over the same period last year, a net profit of 445 million yuan belonging to the parent company, an increase of 8.89% over the same period last year, and a deduction of 384 million yuan for non-net profit, an increase of 8.17% over the same period last year.

The results are in line with expectations, Q4 single-quarter revenue and return net profit continued to grow. The company achieved business income of 8.376 billion yuan in 2020, an increase of 34.68% over the same period last year, of which the main business income was 8.216 billion yuan, an increase of 35.87% over the same period last year. During the reporting period, the company realized a net profit of 445 million yuan belonging to the parent company, an increase of 8.89% over the same period last year, and a deduction of 384 million yuan for non-net profit, an increase of 8.17% over the same period last year. The net operating cash flow of the company during the reporting period was-736 million yuan, a decrease of 1.939 billion yuan compared with the same period last year. The company's asset-liability ratio was 60.18%, an increase in 3.87pct compared with the same period last year. The company's R & D expenditure was 278 million yuan, accounting for 3.32% of business income, an increase of 42 million yuan and 17.81% over the same period last year. The main reason is that subordinate subsidiaries have increased their R & D investment in green construction technology research projects and engineering steel structure tied arch hoisting construction technology research projects. 2020Q4 achieved an operating income of 2.421 billion yuan in a single quarter, down 17.6% from the same period last year, and a net profit of 191 million yuan, an increase of 20.89% over the same period last year.

The gross profit margin decreased slightly, and the expense rate continued to decrease during the period. In 2020, the company's gross profit margin was 9.09%, which was lower than the same period last year. The main reason is that the company's bitumen concrete and related products business implemented new revenue guidelines for the first time, including the part of the original sales expenses that belonged to the contract performance cost to the operating cost. The company's parent net interest rate was 5.44%, reducing 1.19pct compared with the same period last year. The expense rate during the company period in 2020 was 4.73%, a decrease in 0.08pct compared with the same period last year. Among them, the sales expense rate was reduced to 0% by 0.22pct compared with the same period last year, mainly because the company implemented the new revenue criterion for the first time, including the part of the original sales expenses that belonged to the contract performance cost into the operating cost. The rate of management expenses was 4.8%, an increase in 0.5pct compared with the same period last year, mainly due to the increase in staff salaries and intermediary service fees. The financial expense rate of the company is-0.07%, which is higher than that of the same period last year.

The number of newly signed orders is growing rapidly. In 2020, China's fixed asset investment reached 51.89 trillion yuan, an increase of 2.9 percent over the same period last year, while infrastructure investment (excluding power, heat, gas and water production and supply) increased by 0.9 percent over the previous year. The amount of newly signed contracts in the construction sector of the company continues to grow rapidly, breaking through the scale of 10 billion yuan for the first time. During the reporting period, the company signed a total of 171projects with a total amount of 11.156 billion yuan, an increase of 24.91% over the same period last year. At the end of the reporting period, the total amount of the company's orders on hand was 32.214 billion yuan, of which 3.698 billion yuan had been contracted but had not yet started, and the unfinished part of the project under construction was 11.297 billion yuan. The workload of the projects under construction is significantly more than that of the same period last year, and the performance is guaranteed.

Investment advice: the company's homing net profit from 2021 to 2022 is expected to be 5.34 / 625 million yuan respectively, an increase of 20% and 17% respectively over the same period last year, and the corresponding dynamic price-to-earnings ratio is 11.05%, respectively, maintaining the "recommended" rating.

Risk tips: the risk that the newly signed order will fall short of expectations; the risk of increasing competition in the industry; and the risk that the recovery of accounts receivable is not as expected.