Event: the company's annual operating income in 2020 was 2.769 billion yuan, down 14.97% from the same period last year; the net profit of shareholders belonging to listed companies was 247 million yuan, up 45.55% from the same period last year; and the net profit of shareholders of listed companies was 192 million yuan after deduction, an increase of 32.92% over the same period last year. Of this total, 2020Q4 realized operating income of 806 million yuan, down 9.41% from the same period last year, and the net profit belonging to shareholders of listed companies was 14 million yuan, down 13.93% from the same period last year.

The company's gross profit margin has increased rapidly, and the cotton industry has gradually warmed up. The company's overall gross profit margin in 2020 was 16.97%, an increase of 5.64pct over 19 years. From a sub-industry point of view, the price of the company's products increased significantly, in which the gross profit margin of the sugar industry increased by 9.69pct compared with 19 years, and the cotton gross profit margin increased by 6.88pct compared with 19 years. The gross profit margin of fruit and vegetable processing is lower than that in 19 years, mainly because the sales volume of tomato products has increased greatly, and the selling price has dropped slightly, but it has little impact on the profitability of the company. 2020Q1 due to the epidemic, cotton demand has declined, Q3 domestic epidemic improved led to a pick-up demand, cotton prices gradually pick up. We believe that due to the boycott of Xinjiang cotton by some overseas textile and clothing enterprises in recent years and the strong support of domestic textile brands to Xinjiang cotton, the prosperity of the cotton industry will pick up or will continue, and the gross profit margin of the cotton sector is expected to further improve.

Implement the equity incentive plan to effectively enhance the enthusiasm of the core staff. In July, the company completed the first grant of the restricted stock incentive scheme, awarding 6.02 million shares to 97 directors, executives, middle-level and core technical personnel at a price of 2.72 yuan per share. The restricted stock incentive plan deeply binds the core employees to the interests of the company, which helps to enhance the enthusiasm of the backbone staff and has a far-reaching impact on the long-term development of the company in the future.

Profit forecast: we predict that the net profit attributed to the parent company from 2021 to 2023 is 325 million yuan, 376 million yuan and 421 million yuan respectively, and the corresponding EPS is 0.41,0.48,0.54 yuan respectively. The current stock price corresponds to 16.4 shock 14.2 times PE respectively. In the future, the company is expected to benefit from the pick-up in consumer demand and the improvement of cotton prosperity, lint and cottonseed business is expected to achieve high growth, maintaining a "prudent recommendation" rating.

Risk tips: the risk of overstocking of fruit and vegetable products; the risk of a decline in the prosperity of the cotton industry; and the risk that sugar sales are not as expected.