Matters: the company released its annual report in 2016, realizing operating income of 531 million yuan, down 12.57% from the same period last year, realizing net profit of 80 million yuan belonging to shareholders of listed companies, down 14.09% from the same period last year, and realizing EPS0.4 yuan per share, down 74.36% from the same period last year. It is proposed to distribute a cash dividend of 0.78 yuan (including tax) for every 10 shares, and to increase 15 shares for every 10 shares.

The company released a report for the first quarter of 2017, with operating income of 64 million yuan, down 12.4% from the same period last year; net profit attributable to shareholders of listed companies was 7 million yuan, down 43.61% from the same period last year; and EPS was 0.04 yuan per share, down 75% from the same period last year.

Revenue and profit fell slightly compared with the same period last year, and the level of net interest rate was better: the company's operating income in 2016 and net profit belonging to shareholders of listed companies decreased by 12.57% and 14.09% respectively. Q1 in 2017, revenue and net profit decreased by 12.4% and 43.61% respectively. The decline in revenue growth in 2016 was mainly due to the fact that the company's real estate landscape business was located in the lower reaches of the real estate industry chain, and its operating income fell by 8.2% due to the removal of inventory in the macro real estate market. At the same time, due to the complexity of the previous project establishment process, the project landing cycle is longer, and the company's PPP project operation time is relatively short, the operation process is slow, and the company's municipal greening revenue fell 18.08% compared with the same period last year. In 2016, the gross profit margin of the company decreased by 0.47% compared with the same period last year, of which the gross profit margin of landscape engineering decreased by 0.73% year-on-year, which was basically the same as that of the previous period, but the gross profit margin of landscape design decreased by 9.25% compared with the same period last year. This is mainly due to the fact that the company subcontracted part of the non-professional design business to other design companies. The net profit margin of the company in 2016 is 15.07%, and the industry average is only about 13%. The company is 2.07 percentage points higher than the industry average, and the overall cost control ability is strong.

The completed unsettled amount increased significantly, and the stock business guarantee performance increased: the company's inventory at the end of the period was 744 million yuan, all of which were the balance of completed unsettled projects; this amount increased by 396 million yuan, or 113.88%, over 2015. The substantial increase in the company's completed unsettled balance in 2016 is mainly due to the company's new development of Nanjing Xinhaoning Real Estate, a real estate garden business partner this year. The company requires that the project can be completed and settled only after the completion of the project. Schedule payment is not settled, resulting in a substantial increase in the amount of unsettled projects. At the same time, some of the company's large-scale municipal landscape projects take a long time to settle, resulting in a substantial increase in inventory in 2016, and it is expected that related projects will enter the settlement process in the future, bringing about the company's performance. In addition, due to the recent increase in newly signed orders and the increase in margin payment, the net cash flow of the company's operating activities in 2016 was only 72800 yuan, down 99.60% from the same period last year; the advance payment for the current period increased by 162.85% compared with the same period last year, mainly due to the increase in advance payment for the start of new projects; the amount received in advance increased by 58.19% compared with the same period last year, mainly from the receipt of project funds in advance. We believe that the arrival and carry-over of the company's stock business in the future will lead to the growth of the company's performance.

The order is sufficient to set sail, and the landing of large-scale projects is accelerated: according to the data disclosed in the 2016 announcement, the newly signed order of our company in 2016 is at least 2.076 billion yuan; so far, the amount of new order signed by the company in 2017 is 221 million yuan. No major engineering orders were announced in the same period last year, and the speed of taking orders was further accelerated in 2017. At present, the company has large-scale projects such as the construction project of Makou Ecological Garden Cemetery in Yongxiu County, which is the first time for the company to undertake the construction of ecological cemetery. The contract amount of this project reaches 700 million yuan, which is 1.32 times of the company's business income in 2016. the accumulation of experience in large-scale projects will enhance the competitiveness of the company's business development.

Vigorously expand the PPP project + diversification strategy, performance growth is expected: the company in-depth study of PPP project financing, design and construction, asset securitization, operation services and other aspects of the operation mode, superimposed in recent years to undertake two PPP projects accumulated project experience, in 2017 the company plans to seize the country's current opportunity to accelerate the promotion of PPP, vigorously expand PPP projects. Strengthen the layout of municipal comprehensive projects and landscape water treatment projects to further speed up the landing of the project. While accelerating the layout of PPP projects, the company intends to actively open up new business areas and carry out diversified operation, focusing on the development of domestic and foreign renewable resources; the construction and operation of ecological gardens; cultural tourism project development and management and equity investment and other business sectors, while the steady development of the main business, vigorously develop diversified business models. We believe that the company vigorously expand PPP projects in 2017, carry out diversification strategy is clear, and have long-term experience precipitation, the future may bring new highlights for the company's performance growth. In addition, the company announced in March 2017 that the controlling shareholder intends to increase the total share capital of the company by 1% Mur3% within six months, and has now completed an increase of 0.55%, highlighting the strong confidence of the controlling shareholders in the future development of the company.

Investment advice: maintain the company's "overweight-A" rating with a 6-month target price of 29.4 yuan. Benefiting from the rapid expansion of demand in the domestic landscaping market, the company's newly signed orders totaled 2.076 billion yuan in 2016 and 221 million yuan so far in 2017, showing a further accelerating trend; in 2016, the company plans to use capital accumulation fund to increase 15 shares for every 10 shares of shareholders, reflecting the company's management's good expectations for future development. We are optimistic that the company's market capitalization is small and the volume of orders will accelerate future growth. It is estimated that the company's operating income will grow by 95.0%, 38.0% and 28.0% respectively from 2017 to 2019, while its net profit will increase by 108.5%, 33.4% and 29.5% over the same period last year. The company will temporarily maintain its "overweight-A" rating, with a 6-month target price of 29.4 yuan, corresponding to 35 times of 2017 dynamic PE.

Risk hint: the municipal garden project is less than the expected risk, and the landing of the PPP project is not as good as the expected risk.