The impact of the epidemic on the reconstruction of some projects, revenue performance has declined. In 2020, the company achieved operating income of 740 million yuan, down 10.1% from the same period last year, and its net profit was 160 million yuan, down 12.8% from the same period last year. The decline in the company's operating income is mainly due to: 1) the demolition and reconstruction of some houses in the cross-border creative park, resulting in a reduction of 43 million yuan in income; 2) the state-owned owner reduced the rent by 23.5 million due to the epidemic, according to the principle of matching income and cost, the company's operating income decreased accordingly. At the same time, the epidemic also has a certain impact on the overall rental rate of the company. The decline in performance was mainly due to a decrease in gross profit due to a decrease in revenue, as well as a loss of 20 million for two new projects, the Jindu Road Project and the Hongan Mansion Project.
The operating service area is growing steadily, the leasing operation mode is still dominant, and the entrusted operation mode has come to the fore. In 2020, the company's operating service area is 880000 square meters, an increase of 210000 square meters over 2019. In the company's operating service area, the leased operating area is 570000 square meters, the shareholding operating area is 80,000 square meters, and the entrusted operating area is 230000 square meters. The growth of entrusted operating area has accelerated, from 20,000 square meters in 2014 to 230000 square meters in 2020. This light asset model which provides positioning design, project management, investment promotion, operation management and other services for the client and obtains the corresponding income has been paid more and more attention by the company.
The expansion of the project is active and flexible, and the prelude to mergers and acquisitions. In 2020, with the mode of "leasing operation", the company signed the Shanghai Liuzhou Road Qin Holiday Hotel project with an area of about 7000 square meters, and won the bid for Shanghai Puhuitang Road Shenhang Building Project with an area of about 3600 square meters.
The "entrusted operation" mode is used to host 30 projects of Shengxu real estate related companies in Shanghai and Beijing, covering an area of about 150000 square meters. In December 2020, the company signed a "letter of intent" with Yicheng Creative, and the company intends to acquire shares in its related companies. In the future, the company is expected to give full play to the advantages of listing platform to collect high-quality projects in the M & An industry and accelerate the development process of the company
Maintain the buy rating and lower the target price to 12.90 yuan (the original target price is 18.40 yuan). We downgrade the profit forecast for 2021-2023, the company's EPS is 0.43x0.52max 0.61 yuan (the original forecast for 2021-2022 is 0.51 pound 0.59 yuan), and gives the 2021 30x valuation, corresponding to the target price of 12.90 yuan.
Risk hint: the rental rate is lower than expected; the expansion of new projects is lower than expected