Event: Hejing leisurely released its 2020 annual report, with revenue of 1.517 billion yuan in 2020, an increase of 34.9% over the same period last year, and a net profit of 323 million yuan, an increase of 74.7% over the same period last year.

With the rapid growth of performance, the profitability of science and technology cost reduction has improved significantly. The company's core net profit in 2020 reached 350 million yuan, an increase of 86.4% over the same period last year, achieving rapid growth, with a comprehensive gross profit margin of 42.1%, an increase of 4.8pct over 2019, a net profit rate of 21.3% and a 4.9pct increase over 2019, and a significant improvement in profitability, mainly due to the improvement of platform technology in the residential sector and the increase in the proportion of community value-added services. Sector gross profit margin increased 1.3pct to 35.7% compared with the same period last year. 2) in the non-residential sector, the proportion of revenue from commercial operating services has increased, the digital transformation has been gradually completed, and the gross profit margin of the sector has increased significantly from 43.4% in 2019 to 56.9%. 3) the sales fee rate has decreased from 14.7% in 2019 to 12.9%. Management and operation efficiency is optimized.

The acquisition of Cedar Zhaopin has achieved great-leap-forward growth, leading to an eight-fold increase in size in three years. 2020 the total area under management of the company reached 4160 million square meters, an increase of 92.3 percent over the same period last year, and the contract area reached 5340 million square meters, an increase of 56.7 percent over the same period last year, with a joint management ratio of 1.28. The company acquired Cedar Zhaopin on January 17, 2021, and the total area under management reached 127 million square meters after completion, an increase of 205.5 percent over the end of 2020, achieving leapfrog scale growth and becoming the first echelon of mainstream property enterprises. According to the company's performance guidelines, the total area under management of the company is expected to reach 200 million square meters in 2021, with a year-on-year growth rate of 381.1% and an eight-fold increase from 2020 to 2023, corresponding to the leading CAGR100%, growth rate in the industry.

The commercial operation of light assets has made efforts to enter the field of public construction and increase the non-residential layout. from the perspective of the residential sector, the income of residential property management services in 2020 was 1.062 billion yuan, an increase of 39.9% over the same period last year, accounting for 70% of the total income from 67.5% in 2019. Gross profit fell to 59.4% from 62.2% in 2019 The income of community value-added services was 290 million yuan, an increase of 86.6% over the same period last year, and the proportion of income increased from 20.5% in 2019 to 27.3%. The area under management of housing reached 2912 million square meters, an increase of 58.7% over the same period last year, with a rapid growth rate. From the non-residential sector, the income from non-residential property management and commercial operation was 455 million yuan, an increase of 24.4% over the same period last year, with income accounting for 30% and gross profit accounting for 37.8%, of which the income from business operation services for light assets was 96.61 million yuan, an increase of 126.9% over the same period last year. The proportion of total income for non-residential property management and commercial operation increased to 21.2%, and the structure was optimized. The company acquired Guangzhou Runtong in December 2020 and entered the field of public building management. thanks to this, the area under management of non-residential properties reached 1245 square meters in 2020, an increase of 281% compared with the same period last year. The proportion of residential, public construction and commercial managed areas in 2020 was 66%, 23% and 11% respectively, and the number of commercial projects opened by the company increased from 12 in 2019 to 14. According to the performance guidelines, Hexing Pacific will open 26 shopping malls and nine office projects between 2021 and 2023, which will be managed by the company.

Investment suggestion: we predict that the company's net return profit from 2021 to 2023 will be RMB 7.1262 billion, with a year-on-year growth rate of + 120.5%, corresponding to an EPS of RMB 0.35 / 0.63. The current share price corresponds to 2021-2023PE with a target price of HK $11.63, with a target price of HK $11.63 for the first time.

Risk hint: the opening of the new project is not as expected; the output of light assets is not as expected.