Event: the company released its annual report in 2010. during the reporting period, the operating income reached 55.847 billion yuan, up 16.3% from the same period last year, and the net profit was 5.447 billion yuan, up 18.6% from the same period last year.

Gross margin fell slightly and is expected to remain high. During the period, the company achieved a gross profit margin of 28.5%, which was-0.3pct compared with the same period last year. As the high land price projects acquired in 2016-17 have entered the settlement channel one after another, the industry has the common problem of narrowing profit margins under the influence of price limits. The company's gross profit margin for the current period is limited and the absolute level is in a relatively high position in the industry. The net return rate was 9.8%, + 0.2pct year-on-year, and the contract liability was 49.71 billion yuan at the end of the period, + 26.2% year-on-year, and the outstanding amount sold was about 80 billion. The company expects that the carry-over income will remain at 650,700 billion in 2021, and the gross margin center of the carry-over will remain stable.

Sales have entered the hundreds of billions mark, and the progress of urban renewal and transformation is worth looking forward to. During the period, the company realized equity sales of 106.9 billion yuan, + 21.3% compared with the same period last year, and the sales scale exceeded 100 billion for the first time, of which the Great Bay area accounted for nearly 58%, and about 40% came from first-tier cities. During the period, the company flexibly adjusted the push rhythm to achieve a 65% removal rate; realized a sales area of 616.5 million square meters, + 32.8% compared with the same period last year; and achieved an average sales price of 17340 yuan / flat,-8.7% compared with the same period last year. In terms of salable value, the company expects the salable value to be 191.2 billion yuan in 2021, of which the Great Bay area and the Yangtze River Delta account for 52% and 18% respectively; in terms of the rhythm of supply, it accounts for 18% in the first quarter, 36% in the second quarter, 27% in the third quarter and 19% in the fourth quarter. It is estimated that the removal rate of 68% will achieve the sales target of 130 billion yuan in 2021 (+ 21.6% compared with the actual sales of the current period).

In terms of land acquisition, the area of land acquired by the company during the period was 565.0 million square meters, an increase of 37.2% over the same period last year; the amount of land acquired by rights and interests was 47.11 billion yuan, an increase of 73.1% over the same period last year; and the floor price was 8339 yuan per square meter, an increase of 26.2% over the same period last year. In terms of structural split, according to the proportion of the amount of land acquired by rights and interests, the rates of bidding, old reform, mergers and acquisitions are 53%, 29% and 18% respectively, and those of first-tier and second-tier cities are 49% and 51% respectively. According to the proportion of the area of rights and interests, the proportion of the Greater Bay area is 63%. On the whole, the company's land acquisition is concentrated in high-energy cities and the Greater Bay area, and with the company's unique advantages in the field of urban renewal in the Greater Bay area, it is expected that the new soil storage concentration distribution will still be concentrated in the Greater Bay area and high-energy cities. In terms of urban renewal, the company transformed an area of 179.8 million square meters during the period, with a sales value of about 63.91 billion yuan, exceeding the conversion target for the whole year. The company expects to transform 4.2 million square meters in the next 1-2 years, with a corresponding value of more than 200 billion yuan, including more than 1 million square meters of convertible urban renewal projects in the first half of 2021, with a value of nearly 66 billion. The company has 201 urban renewal projects, of which Shenzhen and Guangzhou account for 86% (calculated by goods value). There is great potential for land storage upgrading. We think that thanks to the company's experience in urban renewal in the past 20 years, the business covers a variety of urban renewal types under a professional team of 930 people, which not only creates the company's core competitiveness in the field of urban renewal, but also makes the company in the background of the general decline of the industry gross profit margin center. The gross margin of income to be carried forward remains stable.

The three red lines are about to be met, and the cost of capital target is 7.7%. In terms of the three red lines, the company's asset-liability ratio (excluding accounts received in advance) is 70.3%, net debt ratio is 97.9%, and cash short-debt ratio is 1.56. The proportion of short-term debt is 19.0%, which is-8.2pct compared with the same period last year; the proportion of long-term debt is 81.0%, which is + 8.2pct compared with the same period last year. The debt structure is further optimized. In terms of financing costs, the domestic capital cost of the company during the period is 7.4%, the overseas capital cost is 9.6%, and the weighted average capital cost is 8.7%, and plans to further reduce the capital cost to 7.7% in 2021.

Investment suggestion: the company is given a buy rating for the first time. It is estimated that the EPS of the company in 2021-23 will be 1.25 yuan, respectively, and the corresponding PE will be 2.56 times that of 3.53 PE.

Risk hints: there are repeated uncertainties in the epidemic; performance forecasts and valuation judgments are not up to expectations.