Main points of investment:

The company's net profit grew by 172.3% in 2020, basically in line with expectations. In 2020, the company achieved a total operating income of 3.45 billion yuan, a decrease of 9.27% over the same period last year, a net profit of 180 million yuan, and a loss of 249 million yuan in 2019, an increase of 172.3% over the same period last year. Revenue and profit improved quarter by quarter, of which Q1/Q2/Q3/Q4 achieved revenue of 194 million / 664 million / 952 million / 1.637 billion in a single quarter, an increase of-75.7%, 37.8%, 3.8% and 60.9%, respectively, and net profit of-233 million /-13 million / 32 million / 394 million, respectively, compared with the same period last year, with a year-on-year increase of-75.7%, 37.8% and 60.9%, respectively. Year-on-year growth of-192.7% Universe 170.6% Universe 145.2% Universe 439.2%. The company's 21Q1 realized revenue of 489 million yuan, an increase of 152.4% over the same period last year (38.6% less than the same period of 19Q1). The net profit of the company was-220 million yuan, while the net profit of the same period last year was-233 million yuan (19Q1 net profit was-80 million yuan), in line with expectations.

Affected by the epidemic, business revenue slowed down, but improved operational efficiency superimposed fine management improved profitability. From a product-by-product point of view, the 20-year project income was 2.96 billion yuan, down 10.5% from the same period last year, the proportion of revenue decreased from 1.15pct to 86.0%, and the gross profit margin increased by 1.22pct to 32.0%. The design business income was 369 million yuan, down 1.62% from the same period last year, the proportion of income increased by 0.83pct to 10.7%, and the gross profit margin increased by 2.92pct to 57.9%. In terms of different industries, the income from home decoration was 3.011 billion yuan, down 8.57% from the same period last year, the proportion of the proportion of income increased by 0.68pct to 87.4%, and the gross profit margin increased to 34.1%; the income from public attire was 249 million yuan, down 23.5% from the same period last year, and the gross profit margin was 38.7%, which was basically the same as that in the past 20 years. From the perspective of important subsidiaries, Suimei's income was 229 million, down 10.5% from the same period last year, the net profit was-31.27 million yuan, a sharp reduction of 65.55 million yuan from the same period last year; Ji Ai income was 220 million, down 15.6% from the same period last year, and contributed equity net profit was 30.88 million yuan, down 29.8% from the same period last year; Shanghai Chuangyu's income was 292 million, down 34.4% from the same period last year, and the net profit from contributed equity was 8.37 million yuan, down 50.5% Xinyi's revenue was 109 million, up 5.3% from the same period last year, and the net profit of contributing rights and interests was 19.51 million yuan, down 2.6% from the same period last year. Chongqing, Shanxi, Nantong and Changchun Dongyi contributed a total of 8.91 million yuan in equity profits, an increase of 4.03 million yuan over the same period last year. Excluding the impact of Sumei and the target of the acquisition, the company achieved revenue of 2.42 billion yuan in 2020, down 5.1% from the same period last year, deducting non-net profit of 40.75 million yuan, compared with a loss of 325 million yuan in the same period last year.

The 20-year comprehensive gross profit margin rose 1.86pct compared with the same period last year, the company's cost control ability improved, the expense rate (including R & D) was greatly optimized, the asset impairment decreased, and the return net profit rate increased 11.79pct under the comprehensive influence. In 2020, the company's comprehensive gross profit margin increased by 1.86% compared with the same period last year. With the addition of R & D expenses, the expenditure rate decreased by 3.39 pct year-on-year, in which the salary and rent of employees affected by the epidemic decreased, the sales expense rate decreased by 2.95pct to 18.06%, the management expense rate decreased by 0.24pct to 8.96%, and the R & D expense rate decreased by 0.02pct to 4.29% compared with the same period last year. The increase of 410 million yuan in monetary funds led to an increase of 4.38 million in interest income over the same period last year, and the financial expense rate decreased by 0.18pct to 0.02%. The absolute proportion of credit and asset impairment losses in operating income decreased by 5.55pct to 0.92% compared with the same period last year, mainly due to an underprovision of 204 million of goodwill impairment over the same period last year. Under the combined influence, the company's parent net interest rate increased by 11.79pct to 5.23% compared with the same period last year. The gross profit margin of 21Q1's main business decreased by 0.67pct to 33.50% compared with the same period last year, and the expense rate (including R & D) decreased by 76.67pct to 76.76%. Except that the financial expense rate increased from 2.51pct to 0.88%, the sales / management / R & D expense rates were 49.44%, 18.70% and 7.74%, respectively, and the 47.14pct/22.11pct/9.93pct was reduced by 7.74% compared with the same period last year. The absolute share of credit and asset impairment losses in operating income fell 6.52pct to 0.03 per cent year-on-year, and the 21Q1 net interest rate rose 75.3pct to-45.1 per cent year-on-year under the combined impact.

The payment of staff and workers' salary is reduced, and the cash flow is improved. The net operating cash flow of the company in 2020 was 208 million, with an inflow of 103 million yuan over the same period last year, mainly due to a 171 million reduction in the salary of employees, of which the salary payable to employees decreased by 24.88 million yuan, and the cash paid to and for employees decreased by 143 million yuan compared with the same period last year. In addition, other cash payments related to business activities decreased by 98 million yuan. For the whole year, the cash-to-cash ratio decreased by 3.82pct to 105.4%, bills and accounts receivable decreased by 74.62 million yuan compared with the same period last year, contract assets increased by 17.79 million yuan, and contract liabilities increased by 770 million; the cash-to-cash ratio decreased by 89.7%, and notes payable and accounts payable decreased by 31.06 million yuan compared with the same period last year. The net operating cash flow of 21Q1 was-68 million, 130 million less than the same period last year, the cash-to-cash ratio decreased by 18.2pct to 188%, and the cash-to-cash ratio decreased by 57.3pct to 154%.

After the completion of the real estate construction, the decoration business gradually picked up after the cycle. Over the past 20 years, the company has strengthened the control of order quality. The newly signed order for the whole year was 3.45 billion yuan, a decrease of 20.9% over the same period last year. With the introduction of policies such as "three red lines", the real estate construction and completion end became stronger, and the company's prosperity gradually rebounded. 20Q4 home decoration orders have reached an inflection point, with newly signed orders of 690 million, an increase of 3.3% over the same period last year. 21Q1 newly signed orders, an increase of 125.0%, of which home improvement business newly signed 967 million An increase of 125.1% over the same period last year. By the end of March 2021, the company had 3.67 billion orders on hand, 1.06 times its 20-year operating income.

Downgrade the 21-year profit forecast, add 22-23 profit forecast, and maintain the "overweight" rating: due to the epidemic, the company's order acquisition is lower than expected, and the 21-year profit forecast is downgraded. The company's 21-23 net profit is expected to be 198 million / 214 million / 231 million (the original value for 21 years is 368 million), with a growth rate of 10%, 8%, respectively, and corresponding to the PE of 14X, 13X, 12X, respectively. Maintain the "overweight" rating.

Risk hint: the improvement of real estate completion is not as good as expected; the newly signed order is not as expected.