1) under the impact of the COVID-19 epidemic, the production and sales of PC components still achieved rapid growth. In 2020, Zhi you Zhi Chu Technology achieved an operating income of HK $1.09 billion, an increase of 56.5% over the same period last year, and a net profit belonging to shareholders of HK $160 million, an increase of 43% over the same period last year. Of this total, the main PC component sales revenue was HK $915 million, an increase of 58 per cent over the same period last year, accounting for 84 per cent. The rapid growth in the production and sales of PC components, on the one hand, benefits from the rapid increase in the permeability of the assembly industry, which accounts for 20.5% of new construction in 2020, from 13.4% in 2019; on the other hand, the production capacity and capacity utilization of Zhuyou have increased rapidly after joining the Jianye family. The company's production capacity reached 760,000 m3 at the end of 2020, and capacity utilization increased from 29% in 2019 to 46% in 2020. In 2020, the company achieved sales of 314 million m3 of PC components, an increase of 58% over the same period last year.

2) the profit quality is excellent, PC components reduce costs and increase efficiency, and the decline of the company's debt ratio is affected by factors such as lower depreciation and amortization costs, lower unilateral labor costs and lower unilateral manufacturing expenses caused by the increase in capacity utilization. The unilateral cost of PC components in 2020 was 2115 yuan / m3, down 8.7% from the same period last year. In the future, through the four major measures of R & D cost reduction, design cost reduction, production cost reduction and standard management, the company will continue to reduce production costs, and the cost of precast concrete construction is expected to be equal to that of traditional cast-in-place construction in recent years. The company's debt ratio has also dropped from 46% in 2019 to 30% in 2020, maintaining a high level of profitability while capacity is growing rapidly.

3) the strategy of home wisdom has been steadily advanced.

The company implements the "smart building" strategy to create an innovative collaborative model of the whole industry chain to improve construction quality and reduce assembly construction costs. Gardens and decorations will begin to contribute 37 million of their income in 2020, and are expected to maintain rapid growth in the future.

Maintain the "buy" rating and raise the target price to HK $1.43 per share. We expect the company's operating income for 2020-2022 to be HK $10.890.55 billion, an increase of 56.5%, 107% and 60.8% respectively over the same period last year. The net profit attributable to shareholders was HK $1.59 million, an increase of 43.1%, 68.8% and 40.2% respectively over the same period last year. We give the company 15 times PE, in 2021 corresponding to a market capitalization of HK $4.02 billion, with a target price of HK $1.43 per share, maintaining a "buy" rating.

Risk hint

The policy support for prefabricated construction has weakened; the sharp rise in raw material costs has eroded profits; and the new plant has not been put into production as expected.