Main points of investment

The total revenue in 2020 was 10.787 billion yuan, an increase of 0.02% over the same period last year. In 2020, the income of architectural decoration engineering, curtain wall decoration engineering, intelligent system integration, sales of decorative products, design contracts and other products were 6.685 billion yuan, 2.844 billion yuan, 684 million yuan, 313 million yuan, 176 million yuan and 85 million yuan respectively, with year-on-year changes of-2.37%, 3.00%, 6.07%, 20.44%,-6.61% and 1.35%, respectively.

In 2020, the company achieved a comprehensive gross profit margin of 14.26%, down 0.10% from last year. In 2020, the company achieved a net profit margin of 3.07% and 1.03% compared with last year, mainly due to an increase in the proportion of assets + credit impairment losses. From a business point of view, the gross profit margins of architectural decoration projects and curtain wall decoration projects are 15.26% and 10.64% respectively, changing 1.45pct and-1.24pct respectively.

The company's expenditure rate during the period of 2020 was 9.03%, an increase of 0.24pct over the same period last year, mainly due to the increase in management fee and R & D fee. Among them, the sales rate, the management rate, the financial rate and the R & D rate are respectively year-on-year changes-0.26pct, 0.29 pct,-0.17 pct, 0.39pct.

2021Q1 comprehensive gross profit margin fell 1.01pct year-on-year, net profit rate increased 0.11pct year-on-year; during the period, the rate decreased by 0.37%, including sales rate, management rate, financial rate, and R & D rate, respectively, year-on-year changes in 0.26pct,-0.50pct,-0.40pct, 0.28pct.

In 2020, the proportion of asset impairment loss + credit loss increased by 1.21pct compared with last year, and the net operating cash flow per share decreased by 0.09 yuan per share compared with last year.

Profit forecast and rating: we have downgraded our profit forecast and expect the company to return to its parent net profit of 418 million yuan, 513 million yuan and 643 million yuan in 2021-2023, and the closing price on April 29 will be 24.2,19.8,15.8 times respectively, maintaining a "prudent overweight" rating.

Risk tips: macroeconomic downside risks, lower-than-expected landing of on-hand orders, slow progress of construction projects, deterioration of cash flow, and higher-than-expected losses on bad debts.