Matters: The company released its 2016 annual report, achieving operating income of 1.01 billion yuan, a year-on-year increase of 19.74%, net profit attributable to shareholders of listed companies of 333 million yuan, a year-on-year increase of 226.25%, net profit after deducting extraordinary profit and loss of 640,000 yuan, a year-on-year decrease of 103.60%; and an EPS of 0.1,816 yuan/share, up 226.03% year on year. The company released its report for the first quarter of 2017, achieving operating income of 177 million yuan, a year-on-year increase of 62.06%; net profit attributable to shareholders of listed companies - 7,565,800 yuan, a year-on-year decrease of 854.75%; and EPS-0.04 yuan/share, a year-on-year decrease of 920%. The announcement predicts a net profit range of 5 to 10 million yuan for January-June, with a range of -80.11% to -60.22%. The company's business growth was in line with expectations. High non-operating income made up for unusually high taxes and asset impairment losses, and guaranteed a 226% increase in net profit in 2016:2016, the company's operating income was 1.01 billion yuan, a year-on-year increase of 19.74%, a gross profit margin of 28.62%, close to the average of the garden industry, and the company's main business operations were relatively stable; benefiting from Beijing Shunyi receiving government subsidies and demolition compensation, the company received non-operating income of about 37.27 million yuan in 2016, greatly making up for the expiration of its important subsidiary Hongyao Garden High-tech Certification, 2016 The income tax rate increased by about 9 percentage points to 24.57% year-on-year. At the same time, the company made extensive bad debt preparations during the reporting period, and asset impairment losses of about 37 million yuan eroded profits, making the company finally achieve net profit attributable to shareholders of 33 million yuan, an increase of 226.25% over the previous year. We believe that the triple factors of high non-operating income, high income tax rates, and significant asset impairment are not sustainable. The company's net profit margin in 2016 was 3.3%, a slight improvement from the level of 1.2% in 2015. The long-term return to the industry average is the general trend. The company's asset structure needs to be optimized urgently, and the financial expenses were pressured to be cut: the company's quarterly revenue increased by 62.06% year on year, and its main business was accelerating. Due to historical reasons, the company relied heavily on loans entrusted by Cloud Investment Group. The company's balance ratio was extremely high (71% in 2016, the average value of the garden industry was about 50%). However, with the rapid expansion of the company's business and capital requirements, the increase in corporate bank loans caused the balance ratio to rise to 72% in the first quarter of 2017, and the financial expense ratio climbed to 10.06%. We believe that due to business expansion, the scale of loans has increased, and financial costs have continued to rise, which is the main reason for the company's reduction from January to June 2017. We expect the company to obtain non-public approval documents as soon as possible, optimize financial structure, and improve profitability: In September 2015, the company issued a non-public stock offering plan; in November 2016, the company's non-public stock offering was approved by the Securities Regulatory Commission; the non-public offering of 59.3081 million shares, equity financing of 720 million yuan; the majority shareholder, Cloud Investment Group subscribed 89.77%; raised capital of 4.7 billion yuan to repay loans entrusted to the Cloud Investment Group. 815,000 shares in non-public issuance (accounting for 1.37% of the issued shares) were invested in 45 people, including senior directors and business leaders Motivation; Currently, the company is awaiting approval from the supervisory authorities. After the company's equity financing is completed, the company's financial structure will be significantly improved, and the company's debt level will return to the industry average. At the same time, the company's financial costs will drop drastically, and the net interest rate level is expected to be further improved; at the same time, employee shareholding motivates core personnel and adds impetus to the company's growth. The company has sufficient orders in hand. Relying on major PPP provinces in Yunnan, the advantage of receiving orders is remarkable. Since 2016, the company has signed a total of 11 new orders, with a total amount of 3.238 billion yuan. At the same time, the company has a PPP cooperation framework agreement for the “Mountain, City, and Lake” regional ecological (tourism) complex project in Tonghai County. The agreement has invested 2.5 billion yuan, and the company has sufficient orders; by the end of 2016, Yunnan PPP projects have entered 417 comprehensive PPP information bases in the country, ranking 10th in the country, with a total investment amount of 1.03 trillion yuan, ranking 3rd in the country. The implementation of PPP projects in Yunnan Province is among the highest in the country; As the only listing platform under Cloud Investment Group, shareholder background and company location advantages enhance its ability to obtain orders. Investment advice: Buy-A investment rating, target price of 29.05 yuan for 6 months. The company is the only listing platform under Cloud Investment Group. In the context of the accelerated implementation of PPP projects in Yunnan Province, the company's ability to obtain orders is strong. At the same time, we are optimistic about the company's state-owned enterprise reform space and the continued layout of the ecosystem, and the continued implementation of orders to support performance; maintain the company's performance estimate and maintain the company's buy-A investment rating. The six-month target price is 29.05 yuan, equivalent to a dynamic price-earnings ratio of 35 times that of 2017. Risk warning: State-owned enterprise reform falls short of expectations, PPP progress falls short of expectations, project repayment risks, litigation and arbitration risks, etc.