According to the company's annual report for 2020, the annual revenue was 1.824 billion yuan, down 55.51% from the same period last year, and the net profit was 205 million yuan, down 43.16% from the same period last year. 20Q4 revenue was 572 million yuan, down 57.55% from the same period last year, and the net profit was 48 million yuan, down 59.40% from the same period last year. The decline in revenue was mainly due to the implementation of the new revenue guidelines in the commercial retail business and the reduction in the supply chain business, while the decline in profits was mainly due to the end of the sale of commercial real estate projects.

The multi-dimensional transformation and upgrading of commercial retail business is growing throughout the year under the epidemic. The 20Q4 revenue of the company's commercial retail business was 449 million yuan, down 54.87% from the same period last year, mainly due to the implementation of the new revenue criteria (the income of the joint venture model was changed from the full method to the net method), which increased by 24.68% compared with the previous year. The comparable growth rate of revenue for the whole year was 8.25%, the gross profit of 20Q4 was 242 million yuan, an increase of 35.67% over the same period last year, and the gross profit for the whole year was 624 million yuan, an increase of 3.42%. Although the commercial retail business was affected by the epidemic, the company accelerated its online layout (online sales exceeded 80 million yuan and 130000 members of the community), and store upgrading (the sales volume of 34 brand regions after the reopening of the Love Sea Store, including one national sales champion), helped the business to grow against the trend, and the first position in the region was solid.

The rental rate of mature projects in warehousing and logistics business is more than 95%. We look forward to the landing of the logistics industry fund and promote the rapid expansion of the scale.

The 20Q4 revenue of the company's warehousing and logistics business was 30 million yuan, an increase of 61.13% over the same period last year, and the annual income was 91 million yuan, an increase of 45.69% over the same period last year. 20Q4 gross profit was 50 million yuan, an increase of 503.84% over the same period last year, and the annual gross profit was 83 million yuan, an increase of 123.21%. The sources of growth include the operation of new projects and the increase in rental income of existing projects, and the rental rate of stable operating logistics projects has reached 95.67%. By the end of 2020, the construction area of the company's logistics project was about 1.82 million square meters, an increase of 340000 square meters, which was slightly lower than expected due to the epidemic and other factors. The company is actively promoting the landing of logistics industry funds and is expected to improve development efficiency by means of light assets. In 2020, the company continued to realize the "withdrawal" of the mature project, and the Foshan Lubao project completed the transaction with Blackstone Group, with a cumulative income of 221 million yuan, belonging to 73 million yuan in 2020.

The expense rate increases slightly under the income contraction, and the change of the follow-up measurement method of investment real estate affects the time point of income recognition of logistics projects. The company's 20Q4 sales, management and financial expense rates are 16.95%, 10.88% and 3.31% respectively, and the annual sales, management and financial expense rates are 17.73%, 10.94% and 8.00%, respectively. Affected by the decline in the scale of income, the rate of comparable expenses has increased slightly. The company changed the follow-up measurement method of investment real estate from cost measurement to fair value measurement. The investment income and fair value change income were 3.35 yuan and-4 million yuan respectively before 2019, 1.06 yuan and 304 million yuan respectively after adjustment, and 0.84 yuan and 253 million yuan respectively in 2020.

Investment suggestion: the company's "commercial retail + warehousing logistics" two-wheel drive, retail business regional leading position is stable, while actively exploring new business models, the future is expected to export management experience in the form of light assets; logistics business market demand is strong, strong policy support, the scale of the logistics industry fund is expected to expand rapidly after landing. We have adjusted our profit forecast, and the estimated EPS for 2021-2023 is 0.40,0.58 and 0.67 yuan respectively, and the closing price on April 16 corresponds to PE 11.3,7.8,6.7 times respectively. We are optimistic about the development of the company and maintain the rating of "prudent overweight".

Risk hints: retail market demand has dropped sharply, logistics market demand has dropped sharply, logistics land supply has been substantially tightened, and property value has decreased.