Event: the company released its 2020 annual report on March 31. During the reporting period, the company achieved an operating income of 11.608 billion yuan (- 46.82%) and a net profit of 3.662 billion yuan (+ 567.92%).

Main points of investment

The equity disposal work has been completed and the operating performance has continued to improve. In 2020, the company achieved an operating income of 11.608 billion yuan (- 46.82%), accounting for 98.18% of the annual plan, and the contract contract amount of 11.129 billion yuan, accounting for 79.95% of the annual plan. The net profit of home return is 3.662 billion yuan (+ 567.92%). The substantial increase in net profit is mainly due to the company's 3.39 billion yuan investment income from the disposal of Guangzhou Shipping International Equity in the reporting period and 322 million yuan from the disposal of Yangzhou equity in Chengxi to increase the net profit and loss impact of the current period. During the reporting period, the company's non-recurrent profit and loss totaled 3.945 billion yuan, and the net profit after deducting it was-283 million yuan, reducing the loss by 734 million yuan compared with the same period last year. The main reason is that the company completed the disposal of 27.42% of Guangzhou Shipping International's equity and actually held 46.30% of Guangzhou Shipping International's equity after the disposal was completed. due to the loss of control, the net profit and loss for the current period only combines the impact of Guangzhou Shipping International's January-February data. As the most important production and support base for military ships and special auxiliary ships in South China, the company resolutely fulfilled the first responsibility of protecting and strengthening the army and strengthened the operation and management of civilian products during the reporting period. in the case of COVID-19 epidemic, macroeconomic impact on the ship market continued downturn, new ship prices continued to decline, shipbuilding orders to achieve a breakthrough against the trend, the application of industrial business orders to a new level.

Steel structure engineering business has a strong momentum of development, and the proportion of business has increased. In terms of business, the company's revenue mainly includes shipbuilding products, marine products, steel structure engineering, ship repair and modification, mechanical and electrical products and others. In 2020, considering excluding the relevant performance of Guangzhou Shipping International, the company achieved 10.783 billion yuan in main business income, down 15.07% from the same period last year. Among them, the steel structure business sector increased by 64.75% over the same period last year, the ship repair and modification business sector was basically the same as the previous year, and the ship products, marine products, mechanical and electrical products and other business sectors decreased by 6.26%, 122.13% and 64.15% respectively. The increase in steel structure business income is mainly due to the rapid development of the domestic offshore wind power industry during the reporting period, and the number of orders for offshore wind power infrastructure components increased significantly. The gross profit of the main business was 653 million yuan, with a gross profit margin of 6.05%, a decrease of 0.73 pcts over the same period last year. Except for mechanical and electrical products and other business sectors, gross profit margins increased by 15.77pcts, while gross profit margins of other business sectors decreased.

Among them, shipbuilding products reduce 0.82pcts, marine products reduce 7.59pcts, steel structure products reduce 5.59 pcts, ship repair and reconstruction business plate reduces 6.39 pcts. The main reason for the decline in marine business income and gross profit is that during the reporting period, the Wenchong residential platform product project of Huangpu intends to change the main body of the operating contract and will be adjusted to recognize income by the on-time method. From the perspective of product structure, the proportion of revenue from ship and sea business has been maintained at more than 80%. Due to the increase in the proportion of income from steel structure business, the proportion of revenue from ship and sea business has decreased slightly compared with the previous year. During the reporting period, ship and sea business accounted for 81.32% of total revenue, a decrease of 5.22pcts over the same period last year, and steel structure business accounted for 14.37% of total revenue, an increase of 6.96pcts over the same period last year.

The company's asset structure has been further optimized and its operation has been improved. The shipbuilding industry where the company is located, as a strong cycle industry, due to the impact of the macro environment and the epidemic situation of COVID-19, the shipping market remains in the doldrums, and the price of new ships continues to decline. Under the background of accelerating industrial upgrading and eliminating backward production capacity in the shipbuilding industry, the company pays attention to continuously building core competitiveness such as R & D capability and construction technology, solidly promoting the improvement of management, and ensuring the delivery of key ship products on schedule. Improve profitability. While continuously improving the operational efficiency of the main business, it has actively expanded its application industry business and achieved good results in steel structure, offshore wind power, environmental protection and industrial interconnection, which has enhanced the company's competitiveness and market influence in the application industry.

Investment suggestion: at present, the company's asset structure is further optimized and the management level continues to improve. In the future, the company will further strengthen the development and technical research of new ship types, high-tech and high value-added ships, and orders for military and civilian products are expected to continue to be released. Combined with the planned revenue of 11.2 billion yuan in 2021 and the planned contract of 13.1 billion yuan, the net profit of the company from 2021 to 2023 is expected to be 117 million yuan, 176 million yuan and 218 million yuan respectively, and the EPS is 0.08,0.12 yuan and 0.15 yuan respectively.

Risk tips: interest rate, exchange rate risk; customer contract performance risk.