The return net profit increased by 19% to 5.4 billion: by 2020, the company recorded a return profit of about 5.447 billion yuan, an increase of 18.6% over the same period last year. The performance growth was mainly due to: 1) the company realized operating income of 55.8 billion yuan, an increase of 16% over the same period last year, of which the recognized income from property sales was about 51.194 billion yuan, an increase of 16.7% over the same period last year. 2) the gross profit increased by 15% to 15.9 billion yuan, and the gross profit margin was 28.5%. 3) the total expense rate decreased slightly from the same period last year, accounting for 10.3% of the total income; in addition, the company recorded exchange gains of about 4.67 billion yuan, offset by some sales or completed property impairment or credit loss provisions of more than 2.6 billion yuan, and the company recorded a return profit of about 5.4 billion yuan, an increase of 19% over the same period last year.

The old reform continues to accelerate, and the 21-year equity sales target is about 130 billion: in 2020, the company achieved equity contract sales of 106.9 billion, breaking through the 100 billion mark for the first time, of which more than 1gam3 sales came from the old reform project. By 2020, the company's land reserve is about 2875 million square meters (67% of rights and interests), and the total value of goods is about 670.1 billion yuan, of which urban renewal accounts for about 38%. The transformation process of the company's old reform has also continued to accelerate, continuously thickening the company's high-quality soil reserves, transforming 1.8 million square meters in 2021, with a total saleable value of 64 billion yuan. It is estimated that it will be transformed into 4.2 million square meters from 2020 to 2022, exceeding 2000 billion goods value, and the old reform will continue to accelerate. It is estimated that the conversion of 66 billion goods value will be completed in the first half of 21 years, which is close to the transformation of the whole of last year. The continuous accelerated transformation of the old reform provides a certain guarantee for the steady growth of the company's future sales. It is estimated that the company's target equity sales in 2021 is about 130 billion yuan, the saleable value is 191.2 billion yuan, and the saleable value is sufficient, which can ensure the company to achieve its goal smoothly.

Rights issue and related acquisitions may stimulate corporate governance concerns: on March 25, 2021, the company announced that it planned to buy the Yaohui International City, Chaoyang District, Beijing, for 13 billion yuan from Chairman Guo, either through its own funds, loans and rights issues. The company announced that it would issue shares at a subscription price of HK $2.95 per rights share at a subscription price of HK $2.95 per rights issue. To raise a maximum of about HK $2.586 billion-HK $2.729 billion as part of the acquisition of the Beijing project. In addition to raising funds, although this practice is mainly to increase the net assets of the company after the injection of the Beijing project, which is conducive to the rapid optimization of statements, in addition, major shareholders will simultaneously participate in the full rights issue plan, so as to increase the equity ratio of major shareholders, the estimate can be raised to more than 40%. However, in the form of a rights issue and a large discount on the stock price, it does exceed market expectations, and the short-term market reaction is negative and may, to a certain extent, stimulate capital markets to worry about corporate governance.

Downgrade the target price of HK $6.18 and maintain the buying rating: in the short term, we think that the related acquisition and rights issue do exceed market expectations, which is expected to cause concerns about corporate governance in the short term, and the market reaction is negative, but considering that after the completion of this rights issue, the share proportion of major shareholders has increased, and it is helpful for the company to optimize its statement structure. at the same time, the business level of the company is still in a good trend, and the transformation of the old reform continues to accelerate. Sales are expected to grow by more than 20% in the next few years, and the debt structure is also constantly optimizing. We expect to achieve a net profit of about 7 billion yuan, 9 billion yuan and 10.9 billion yuan in 2021-2023. Considering that the company's related acquisition and rights issue may cause corporate governance concerns, the valuation gives a certain discount to the target price-to-earnings ratio of 2022, and the target price is about HK $6.18 to maintain the buy rating.