Municipal garden two-wheel drive, the overall profitability is strong: Qianjing Garden Beijing private holding company, the actual controller Hui Quande, Yang Jing and his wife, a total of 55.31%, centralized ownership structure. The company is mainly engaged in landscape construction and landscape design, and the proportion of the company's municipal garden and real estate garden business is about 56% and 42% respectively. In 2015, the gross profit margin of the company's municipal garden and real estate garden business exceeded 26%, and the net profit margin reached 15.4%. The overall profitability is strong.

Deep ploughing in North and East China is expected to benefit from the construction of Xiongan New area: the company's business is mainly distributed in East China and North China. In June 2016, the business income of East China and North China was 46.45% and 27.6% respectively, accounting for 74.05% of the total income of the company. The company is a local garden company in Beijing and has a long-term layout in North China. The proportion of business income in North China is increasing year by year. In the future, it is expected to benefit from the development and construction of Xiongan New area, and its performance will achieve rapid growth. At the same time, the company has the first-class qualification certificate of urban landscaping enterprises, Grade A qualification for landscape engineering design, and the company's project and cost control capabilities are remarkable. In 2016, the net profit margin of Q3 increased to 16%, 3 percentage points higher than the industry average. North China layout first-mover advantage + complete qualification certification + excellent management and control ability to help the company's business development.

Sufficient orders speed up the company's growth, and large-scale project experience enhances competitiveness: the company's 2015 annual report shows that the order on hand at the end of the year is 1.3 billion yuan, and the total contract amount signed by October 2016 is 1.224 billion yuan. Canada head office announced 852 million yuan of new contracts after October 2016, and the newly signed orders in 2016 were at least 2.076 billion yuan, which was 3.41 times the company's 2015 operating income. Considering the company's on-hand orders at the end of 2015 and 2016 revenue and newly signed orders, we estimate that the company's current orders-on-hand will exceed 3 billion yuan, with sufficient orders on hand to ensure the release of the company's performance; at present, the company has large-scale projects such as Beijing Expo Park Landscape, Yinchuan Flower Expo and Lanzhou Science and Technology Industrial Park, which have accumulated project experience to further enhance the competitiveness of business development.

The construction of urbanization drives the demand for greening, and the garden of "sponge city + characteristic town" benefits: China's urbanization rate in 2016 was 57.35%, an increase of about 13 percentage points over 44.34% in 2006, and the process of urbanization is remarkable, but there is still room compared with about 80% of the level in western developed countries. The construction of urbanization promotes the investment demand of landscaping and is beneficial to the expansion of the market of landscape engineering enterprises. According to the 2020 sponge city construction target of the State Council in 2015, we estimate that the investment scale of sponge city will reach 1.56-1.87 trillion yuan in the next five years. At the same time, according to the Ministry of Housing and Construction carrying out the pilot project of characteristic towns, the total number of characteristic towns in the country will reach 1000 in 2020. It is estimated that the investment of characteristic town assets that will be included in the Ministry of Housing and Construction's national goal of small towns with national characteristics will exceed 3 trillion yuan. The garden business is the top priority in the construction of sponge city and characteristic town, and the market cake of garden enterprises is expanded again.

Investment advice: benefiting from the rapid expansion of domestic landscaping market demand, the company's newly signed orders totaled 2.076 billion yuan in 2016, 3.41 times of 2015 business income, and accelerated in 2017. in recent years, the company's garden business has ploughed deeply into North and East China, and as a local company in Beijing, it is expected to benefit from the construction of Xiongan New area. The company's market capitalization is small, project management and expense control are orderly, and the volume of orders will contribute to future growth. We expect the company's operating income from 2016 to 2018 to be 674 million yuan, 877 million yuan and 1.096 billion yuan respectively, with growth rates of 11%, 30% and 25%, respectively. in the same period, the net profit was 133 million yuan, 167 million yuan and 204 million yuan respectively, up 42.6%, 25.6% and 21.8% respectively over the same period last year. In response to the close on April 6, 2017, the company's 2017 dynamic PE was 31.9times, giving the company a "overweight-A" rating for the first time, with a six-month target price of 29.4RMB, corresponding to 2017 dynamic PE35 times.

Risk hints: economic downside risk, less than expected risk of sponge city promotion, lower than expected risk of order landing, etc.