The main business growth is steady, and the cash flow remains stable.

The company's 2016H1 realized operating income of 120 million yuan, an increase of 53% over the same period last year, a net profit of 22.83 million yuan, an increase of 36% over the same period last year, and a net profit of 20.25 million yuan after deducting non-recurring profits and losses, an increase of 523% over the same period last year. The larger increase in performance is due to the substantial increase in non-business income brought about by the value-added tax rebate obtained by Lihe environmental sewage treatment business, and there is no need to pay the income tax charges for the merger of Tsinghua Science and Technology Park in the same period last year.

Steady industrial development and continuous contribution to performance

The company's industrial subsidiaries overcome the pressure of external economic downturn and shrinking market demand, took the initiative to adjust and reform, and various business indicators rose against the trend. Huaguan Technology has intensified its market development efforts, and product sales have continued to climb. During the reporting period, revenue reached 41.51 million yuan, an increase of 435% over the same period last year. Its application for listing on the new third board has been formally accepted, and it is expected that it will bring a greater increase in market value with the completion of listing in the future. Huaguan capacitor has strengthened product quality control, and its production capacity and technical level have been further improved. During the reporting period, revenue reached 35.81 million, an increase of 4% over the same period last year. Lihe Environmental Protection continuously maintained the safe and stable operation of production in the plant, continued to maintain sewage and sludge treatment up to standard discharge records, and achieved revenue of 29.26 million yuan, an increase of 31% over the same period last year.

Equity investment is off to a good start, and the asset management business has achieved remarkable results.

The company focuses on TMT, high-end manufacturing, environmental protection technology, Great Health, cultural media and other five major industries, and constantly explore investment projects with good profitability and growth potential. Among them, through direct investment to complete the vitality of Tianhui, goods, Feili technology and other high-quality projects investment; through cooperation with IDG Capital, Dongfang Fuhai, founder Technology and other high-quality venture capital institutions and well-known industrial capital, set up Shanghai Lulin, Xinglan Huajin, Lihe Huajin, Huajin founder and other equity investment funds.

In the first half of the year, the company set up three new real estate funds, including Huajin Wisdom, Huitong Fengying and Huajin Zhiying, with a subscription scale of more than 5.3 billion yuan. During the reporting period, the company completed a total overseas investment of about 170 million yuan, an increase of 65.83% over the same period last year, and is building an investment and asset management system covering core cities across the country.

The reform of state-owned enterprises is advancing, and the coordination of local resources can be expected.

As the only listing platform of Zhuhai Financial Control, the company is the most direct beneficiary in the reform of state-owned enterprises in Zhuhai. Zhuhai Financial Holdings has rich financial assets, including 12 participating financial institutions and 9 quasi-financial institutions, with a layout in the country's core financial cities. By the end of 2015, the total assets have reached 21.6 billion and the assets under management have exceeded 35 billion.

With the acceleration of the reform process of state-owned enterprises, the company will undertake financial support from local industrial resources, and is expected to transform to a regional financial control platform to achieve resource integration and internal coordination.

Be optimistic about the development prospect and maintain the rating of "increasing holdings"

We are optimistic about the company's transformation venture capital development strategy and steady progress of the existing results on the basis of the steady development of traditional industries and the provision of sustained and stable cash flow. In the future, with the acceleration of the reform of state-owned enterprises, as the only listing platform of Zhuhai Financial Control, the company is expected to undertake the resource support of local economic development and is optimistic about the investment opportunities for companies to benefit from the integration of resources under the reform of state-owned enterprises. It is estimated that the EPS in 2016-18 will be 0.11,0.14 and 0.16 yuan respectively, corresponding to PE 147X, 121x and 108X, with a target price range of 18Murray 20 yuan, maintaining the "overweight" rating.

Risk hint: the risk of market volatility and the reform of state-owned enterprises are not as expected.