Events:

According to the annual report released on the evening of April 19, the operating income in 2020 was 3.066 billion yuan, an increase of 3.77 percent over the same period last year, and the net profit was 52 million yuan, down 35.85 percent from the same period last year.

Comments:

Q4 performance is eye-catching, asset impairment is a drag on profits. In the fourth quarter alone, the company achieved an operating income of 995 million yuan, down 5.44% from the same period last year, and a net profit of 47 million yuan, an increase of 197.48% over the same period last year.

In terms of cash flow, the company's net operating cash flow returned to positive for the first time in the fourth quarter, achieving a net operating cash flow of 178 million yuan, and the cash flow pressure was slowed down. The lower-than-expected net profit of the company for the whole year is mainly due to the provision of 103 million yuan for impairment of assets.

Science and technology empower agriculture and create new profit growth points. The company announced in January that it planned to buy 29.07% of Huayi Agriculture at a price of 40.36 million yuan. After the transaction is completed, the company will hold 48.03% of the shares, making it the largest shareholder. At present, the kenaf breeding base of Huayi Agriculture in the south of Hainan Province is the largest and best kenaf seed breeding base in China. With the help of Huayi's advanced agricultural technology resources, accelerate the strategic layout of the company in the hemp crop industry chain, help the company to obtain new profit growth points, in line with the company's strategic development planning and the requirements of the industrial chain extension.

Expand the scope of operation, increase the garden ecological business. The company announced in March that Saishi Garden, a wholly-owned subsidiary, intends to acquire 100% equity in Wuxi Flower Dynasty, Yishui Hua Dynasty and Gaotang Hua Dynasty, with a total amount of 51.66 million yuan. After the completion of this transaction, Saishi Garden plans to use the target company as a nursery planting and sales base to provide seedlings for the company's projects; at the same time, the company will give full play to its business advantages and actively build a garden ecological business development ecosphere. It will have a positive impact on the future operation of the company.

The commercial vehicle market has warmed up and the auto parts business has benefited. The commercial vehicle market where the company is stationed has picked up after the epidemic, continuing the continuous growth that began in April 2020. In January and February of 2021, domestic commercial vehicle sales were 4584max 2989000 respectively, an increase of 43% and 246% over the same period last year. The commercial vehicle market has ushered in a recovery, which will drive the demand for auto parts, and the company's spare parts sector will further develop.

Give the company an "overweight" rating. Considering that the company's asset impairment is a large loss, and the engineering business has the risk of bad debts, the profit forecast is lowered, and the company's EPS from 2021 to 2023 is estimated to be 0.05, 0.07, 0.09 yuan.

Risk Tip: the risk that newly signed orders fall short of expectations and performance forecasts and valuation judgments fall short of expectations.