Event: the company released its annual report for 2020, with operating income of 991 million yuan, an increase of 3.91% over the same period last year, and net profit belonging to shareholders of listed companies was 14.0998 million yuan, down 79.06% from the same period last year. The comments are as follows:

In 2020, the company's homing net profit decreased by 79.06% compared with the same period last year, mainly due to the increase in costs, management and financial expenses, depreciation and the decline in non-recurrent profit and loss. 1) the company's comprehensive gross profit margin in 2020 was 21.90%, down 1.54% from the same period last year, mainly due to the low gross profit margin of new projects started by the company in 2020 and the increase in the cost of assembly projects. The company's main business, integrated housing (85% of revenue in 20 years), its gross profit margin fell from 37% in 2019 to 24% in 2020. And affected by the epidemic situation of COVID-19, the construction of the company's prefabricated construction project slowed down, the flow of personnel was blocked, the construction period was extended, and the cost increased. 2) in 2020, compared with the same period last year, management expenses and financial expenses increased by 47.68% and 102.67% respectively, and the amount of depreciation of fixed assets increased by 122% over the same period last year. The increase in management expenses over the same period last year was mainly due to the increase in the amount of depreciation of fixed assets during the reporting period as a result of the consolidation of the wood-plastic R & D building, the commissioning of Jiangsu Suqian factory and the change in the number of years of depreciation of fixed assets; the increase in financial expenses was mainly due to the increase in the amount of financing needed for business development compared with the same period last year. In 2020, the amount of non-recurrent profits and losses belonging to shareholders of listed companies is about 10.5 million yuan (21.5 million yuan in 2019), mainly including government subsidies included in the current profits and losses, profits and losses on disposal of non-current assets, and so on.

In 2018, the carbon emissions of building materials production and construction accounted for 55.21% and 1.93% of the total building emissions respectively. Prefabricated buildings have significant advantages over traditional buildings in these two stages. The proposal of carbon peak and carbon neutralization is conducive to the accelerated development of the industry. According to the data of the 2020 China Building Energy consumption Research report, the total carbon emissions of the whole building process in 2018 was 4.93 billion tons, accounting for 51.3% of the national carbon emissions. Among them, the carbon emissions in the production stage of building materials account for 55.21% of the total emissions in the whole process of construction, 1.93% in the stage of construction, and 42.87% in the stage of construction. The use of large-scale intensive production in prefabricated buildings can save consumables, reduce energy consumption and reduce construction waste to a certain extent; mechanized installation is adopted in the process of construction, which can reduce air, noise, waste and waste water pollution, and reduce carbon emissions in the whole building life cycle.

In the stage of building materials production, the carbon emissions of prefabricated buildings reached 9.33% compared with traditional cast-in-place houses, and the carbon emissions of wastes reached 24.99% compared with traditional cast-in-place houses. With reference to the "Evaluation and comparison of Energy Saving and Emission reduction between prefabricated Assembly and cast-in-place Housing Construction" by the Housing industrialization Promotion Center of the Ministry of Housing, taking the second phase of the new mileage project of Beijing Investment Vanke as an example, in general, the carbon emissions of prefabricated buildings reach 9.33% compared with traditional cast-in-place houses. In addition, the saving rate of steel bar cutting has reached 36.70%. The saving rate of concrete reached 24.95%. The partial saving rate of mortar is 82.35%, the saving rate of thermal insulation materials is 54.55%, and the carbon emission of prefabricated housing is 24.99% higher than that of traditional cast-in-place housing.

In the stage of construction, prefabricated buildings have the advantages of energy saving, artificial carbon saving and water saving. Referring to the "Analysis and Research on carbon Emission of concrete fabricated and cast-in-place Residential buildings" by Jiangsu Architectural Science Research Institute, take a project in Nanjing as an example. 1) Energy saving: compared with cast-in-place buildings, the energy saving of prefabricated buildings is mainly reflected in mechanical diesel oil and mechanical electricity, with saving rates of 22.80% and 20.69% respectively, and the carbon emission saving rate is 20.09%. The artificial carbon saving per unit building area is 2.08 kg / m2. 2) artificial carbon saving: prefabricated buildings adopt the way of prefabricated components, and less labor is used in the process of on-site construction, which brings the advantage of artificial carbon saving. According to the calculation of China's per capita carbon emissions of 7.7 tons in 2015, the artificial carbon saving per unit building area is 2.08 kg / square meter; 3) Water conservation: prefabricated components can greatly save water for on-site mixing concrete and on-site maintenance of concrete components. According to the calculation, the total carbon emission saved by water saving is 333.62 kg, and the carbon emission saved per unit building area is 0.02kg / square meter.

Investment advice: maintain the overweight rating. It is estimated that the return net profit of the company in 2021 to 2023 will reach 1.0,1.6 and 200 million yuan respectively, with a corresponding price-to-earnings ratio of 31,21 and 16 times. The prefabricated construction industry is currently supported by policies, and the industry is in a period of high growth. The company's Jiangsu Suqian production base was successfully put into production in the first half of 2019, improving the capacity layout. The company has strong technical and order-taking ability; after the controlling shareholder becomes China Rallway, it is expected to achieve business coordination.

Risk hints: policy support in the prefabricated construction industry is lower than expected; competition in the industry intensifies; downstream demand for prefabricated construction is lower than expected; raw material costs grow higher than expected; China Rallway brings lower-than-expected business support to the company; loss or aggravation of impairment of assets such as bad debts.