The company's 2020 revenue decreased 68.23% year on year, and Guimo's net profit decreased 37.13% year on year. The company announced its 2020 annual report: achieved operating income of 858 million yuan in 2020, a decrease of 68.23% over the previous year; achieved net profit of 97 million yuan, converted to fully diluted EPS of 0.23 yuan, a decrease of 37.13% over the previous year; and realized net profit after deducting 88 million yuan from Guimo, a decrease of 28.32% over the previous year.

Looking at a single-quarter split, 4Q2020 achieved operating income of 231 million yuan, a decrease of 66.00% over the previous year; achieved net profit of 79 million yuan, converted to fully diluted EPS of 0.19 yuan, an increase of 116.50% over the previous year; and achieved net profit of 49 million yuan after deducting non-return to the mother, an increase of 26.67% over the previous year.

The company's consolidated gross margin increased by 32.29 percentage points in 2020, and the cost rate for the period increased by 22.20 percentage points. The company's comprehensive gross margin in 2020 was 52.20%, up 32.29 percentage points from the previous year. Looking at a single-quarter split, 4Q2020's comprehensive gross margin was 58.09%, up 37.22 percentage points from the previous year.

The company's expense ratio in 2020 was 33.46%, an increase of 22.20 percentage points over the previous year. Among them, the sales/management/finance/R&D expenses ratio was 5.46%/29.45%/-1.46%, respectively, a year-on-year change of 3.54/19.65/-0.98 percentage points, respectively. The 4Q2020 company's expense ratio for the period was 24.48%, up 12.74 percentage points from the previous year. Among them, the sales/management/finance/R&D expenses ratio was 5.40%/20.76%/-1.68% respectively, and the year-on-year changes of 3.14/ 10.43/ -0.83 percentage points respectively.

Innovate and develop the online mini program business, speed up the layout of the community business network, and the company added 2 new supermarkets and 5 convenience stores (including 1 franchise store) during the reporting period. At the same time, the company innovated marketing initiatives to reposition and promote the “You+My Family ZTE Building” advertising slogan.

The total number of visitors to the “ZTE Building+” mini-program in 2020 was 1.32 million, with a cumulative total of 18.888 million visits. The total number of members was nearly 125,000, and the highest transaction volume in a single day exceeded one million yuan.

Maintain profit forecasts and maintain “increase holdings” ratings

We maintain our 2021/2022 EPS forecast of 0.25/0.29 yuan respectively, adding 0.34 yuan to the 2023 forecast. The company's online business and convenience store business are progressing smoothly. Currently, the company's PB is 1.1 times, and measured using the historical cost method, long-term investors can gradually pay attention and maintain the “increase in holdings” rating.

Risk warning

Some store leases cannot be renewed when they expire, and the pace of new business formats and new store expansion falls short of expectations.