Incidents:
On April 25, 2021, Hanjia Design released its 2020 annual report and its performance report for the first quarter of 2021. The company achieved revenue of 2,274 billion yuan in 2020, an increase of 92.59% over the previous year; it achieved net profit of 70.11 million yuan, a decrease of 23.96% over the previous year. In the first quarter of 2021, the company achieved operating income of 526 million yuan, an increase of 67.07% over the previous year; it achieved net profit of 208.469 million yuan, an increase of 10.13% over the previous year.
Commentary:
The main business grew dramatically, and orders were sufficient and developing strongly. The company's two main businesses are EPC general contracting and design business, which accounted for 59.67% and 39.04% of revenue in 2020 respectively. Among them, EPC general contracting revenue was 1,357 million yuan, up 155.67% year on year; design business revenue was 888 million yuan, up 37.93% year on year. Thanks to the company's strong market development, the EPC general contracting business field continues to expand, contributing 44.8015 million yuan in gross profit in 2020, an increase of 89.15% over the previous year. Currently, the company's EPC has an on-hand order contract of about 7 billion yuan. There are plenty of on-hand orders, and the core competitiveness is remarkable.
Changes in fair value and impairment losses affect net profit performance. Due to the decline in earnings from changes in fair value and the rapid development of the EPC business and credit impairment losses brought about by the prudence principle, the company's net profit to the parent fell 23.96% year-on-year. However, after deduction, the net profit of the mother returned to the mother was 71,921,300 yuan, which was actually still a sharp year-on-year increase of 69.35%.
Hangzhoushi shares were listed together, and their performance contribution was remarkable. Hangzhou Construction Co., Ltd. was acquired by the company in 2019, with revenue of 678 million yuan and net profit of 64,161 million yuan in 2020, accounting for 78.40% of the company's net profit to the mother, which contributed significantly; in 2020, net profit after deducting non-return to the mother reached 59.9047 million yuan, exceeding the performance promise. The acquisition of Hangzhou Construction Co., Ltd. has further expanded the company's business chain and helped the company achieve breakthrough development in the fields of gas, thermal power, municipal engineering, etc., and business synergies have gradually been reflected and continued to grow.
The financial budget showed confidence, and the first quarter performed well. The company released its 2021 financial budget report on the same day. Net profit attributable to parent company owners is expected to increase 50% to 80% year-on-year, reaching 105 million yuan to 126 million yuan. The sharp growth target shows the company's management's confidence in business conditions and performance. The company achieved operating income of 526 million yuan in the first quarter, an increase of 67.07% over the same period last year. The contract is progressing well and is expected to achieve the annual budget target.
Give the company a “buy” rating, and adjust profit forecasts and valuations based on the company's operating estimates. The company's 2021-2023 EPS was 0.53/0.64/0.82 yuan, and the corresponding PE was 19.16/15.96/12.48 times.
Risk warning: Market competition increases EPC business management risks, and valuation and profit forecasts fall short of expectations.