Matters: the company released the annual report for 2020 and the first quarter report for 2021, achieving total operating income of 5.581 billion yuan and 1.027 billion yuan respectively, an increase of 14.87% and 83.60% respectively over the same period last year, and a net profit of 258 million yuan and 27 million yuan belonging to shareholders of listed companies, up 4.35% and 62.72% respectively over the same period last year to achieve EPS 0.37 yuan in 2020, down 9.76% from the same period last year. The weighted average return on equity was 8.32%, down 2.49 percentage points from 10.81% in the same period last year. A cash dividend of 0.5 yuan (including tax) shall be distributed to all shareholders for every 10 shares.

The revenue of the main business is growing rapidly, and the loss of asset impairment affects the profit growth in 2020. The company achieved revenue of 5.581 billion yuan in 2020, a year-on-year increase of 14.87%, which was significantly higher than the revenue growth rate of the first three quarters. Pct, 's 2020Q1-Q4 revenue growth rate was-35.25%, 2.90%, 33.91% and 41.87% respectively, and the company's revenue growth rate increased quarter by quarter. In 2020, the main business revenue was 5.14 billion yuan for decoration and construction (+ 10.12% compared with the same period last year), 129 million yuan for design business (+ 38.93% compared with the same period last year), 175 million yuan for garden municipal business (+ 77.20% compared with the same period last year) and 122 million yuan for property management service business (revenue classification for new business in 2020). The revenue of each main business increased year-on-year. Among them, decoration construction business is still the main source of revenue of the company, accounting for 92.09% (year-on-year-3.96 pct), design business revenue accounted for 2.31% (year-on-year + 0.40 pct), garden municipal revenue accounted for 3.14%) (year-on-year + 1.10 pct), period property management service revenue accounted for 2.18%, the company is based on the traditional main decoration construction business, diversified expansion has achieved initial results. In 2020, the company achieved a net profit of 258 million yuan, a year-on-year growth rate of 4.35%, an increase of 3.15% over the previous three quarters. The year-on-year growth rates of pct,2020Q1-Q4 in each quarter were-47.67%,-2.27%, 21.25% and 19.63%, respectively. The company's 2020 net profit growth rate is lower than the revenue growth rate, or mainly due to a substantial increase in asset impairment losses during the period (an increase of 65 million yuan compared with the same period last year). 2021Q1's revenue growth rate is as high as 83.60% year-on-year, which is 18.88% faster than that of 2019Q1. Net profit growth rate is 89.30% year-on-year. During the period, minority shareholders' profit and loss increased significantly. Net profit growth rate of home ownership was 62.72%, which was lower than that of revenue growth in the same period. Net profit deducting non-home net profit was as high as 142.71%, far exceeding revenue growth rate, and the main business performance increased rapidly.

The gross profit margin remained stable and the expense rate during the 21Q1 period decreased compared with the same period last year. In 2020, the overall gross profit margin of the company was 17.29%, which was increased by 0.01% compared with the same period last year. The gross profit margin of pct, remained stable, of which the gross profit margin of decoration and construction plate was 16.84% (year-on-year-0.17 pct), the gross profit margin of design business was 31.06% (year-on-year + 2.18 pct), and the gross profit margin of garden and municipal business was 18.79% (year-on-year-0.42 pct), design business gross profit margin increased significantly. The expense rate during the company period in 2020 was 8.57%, an increase of 0.13 pct over the same period last year. Among them, the rate of management expenses increased by 0.46 pct year-on-year to 2.94%. During the period, mainly due to the increase in expenses for new subsidiaries and amortization expenses for the purchase of intangible assets, the company's management expenses increased by 36.28% year-on-year. The rates of sales expenses, financial expenses and R & D expenses decreased by 0.03 pct, 0.22 pct and 0.08 pct respectively compared with the same period last year. In 2020, the impairment loss of the company's assets increased by 3995.87% compared with the same period last year, and the overall net interest rate was 4.64%, down 0.37 percentage points from the same period last year. The expense rate of 2021Q1 during the period was 11.63%, a decrease of 1.47 pct, compared with the same period last year, of which the sales expense rate, financial expense rate and R & D expense rate decreased by 0.47,1.27 and 0.13 pct respectively.

The money on hand is more abundant, and the asset-liability ratio has increased slightly. In 2020, the company's operating cash flow was-302 million yuan, from a net inflow of 66 million yuan in the previous year to a net outflow, mainly due to an increase in project costs, staff and other business activities during the period. The company's income-to-cash ratio during the period was 90.10%, a slight increase over the previous year. The net investment cash flow was-19 million yuan, a decrease of 85.47% over the same period last year, and the net cash flow of fund-raising was 146 million yuan, a decrease of 55.97% over the same period last year. At the end of 2020, the company's monetary capital was 1.288 billion yuan, which was lower than that at the end of 2019, but accounted for a higher proportion of total assets, accounting for 17.63% at the end of 2021Q1. The monetary fund was 842 million yuan, and the funds on hand were relatively abundant. The total liability of the company at the end of 2020 was 3.846 billion yuan, which was mainly composed of short-term loans, notes payable and accounts payable, accounting for 37.47% and 36.38% of the liabilities, respectively. At the end of 2020, the company's asset-liability ratio was 52.67%, a slight increase of 0.29 pct from the beginning of the period.

The emerging business is progressing smoothly and there are plenty of orders for future development. Based on the traditional decoration business, the company continues to expand the layout of the industrial chain, actively extending to housing construction, municipal, curtain walls, gardens and other engineering fields, while continuing to develop property management, IDC, block chain and other businesses. The company has completed the equity acquisition of 25% of Saige property and 100% of Jiazette, and the scale of property management has been expanding continuously. Jiazette achieved a net profit of 157.618 billion yuan in 2020, with a performance commitment rate of 122.09%. The company continues to promote scientific and technological transformation. In terms of IDC, in May 2020, the company acquired a 60% stake in wide original Electronics by cash acquisition, and plans to invest 1.5 billion yuan to build Wusha (Kuanyuan) big data Center. It is estimated that the total number of cabinets will reach 10,000 upon completion. At the same time, the smart chain has been successfully put into operation, and the blockchain business is worth looking forward to. According to the announcement, the company will complete the issuance of convertible bonds in April 2021, and the funds raised will be mainly used for the construction of construction projects, Wusha (Kuangyuan) big data Center and supplementary working capital, which will help the company's performance release. The company completed the restricted stock grant of the equity incentive plan in 2021 in February 2021, and the performance evaluation target of the exercise conditions at the level of revenue growth is that the average annual growth rate of operating income from 2020 to 2023 is not less than 25%, indicating the company's confidence in future development. The company signed a new order of 7.056 billion yuan in 2020, an increase of 4.36% over the same period last year, which is significantly better than the overall level of the decoration sector. by the end of 2020, the company had an order of 10.573 billion yuan, which is 1.9 times the revenue in 2020, and the order is sufficient to support the release of future performance.

Investment suggestion: the company's operating income from 2021 to 2023 is expected to be 6.977 billion yuan, 8.512 billion yuan and 10.214 billion yuan respectively, up 25%, 22% and 20% respectively over the same period last year; net profit is 334 million yuan, 418 million yuan and 520 million yuan respectively, up 29.1%, 25.3% and 24.3% respectively over the same period last year; earnings per share are 0.46 yuan, 0.58 yuan and 0.72 yuan respectively. The dynamic PE of the company is 12.8x, 10.2x and 8.2x respectively, and the PB is 1.2x, 1.1x and 1.0x respectively. The company focuses on the main decoration industry, actively expands and extends around the engineering industry chain, and transforms property management, IDC and other emerging fields through endogenous growth and extension expansion strategy. The company's performance has improved steadily, and the future development is promising. We are optimistic about the company's growth and the improvement of new business valuation, and maintain the "buy-A" rating.

Risk tips: the performance is not up to expectations, the order growth is slow, the transformation is lower than expected, the project landing is not as expected, the industry competition is intensified, and so on.