Incident: China Holdings SEG released its 2016 semi-annual report. In the first half of the year, it achieved operating income of 42.72 million yuan, an increase of 151.38% over the previous year; net profit to mother was 23.57 million yuan, and losses increased 8.57% year on year. Core idea The loss in the first half of the year did not hinder the annual performance: the main reason for the company's revenue increase of 151.38% year-on-year in the first half of the year was the rapid growth of the technical consulting and planning service business. This mainly came from the increase in revenue from the Clean and Control Human Settlement Design Institute in the field of planning; the main reason for the net profit loss of 23.57 million to the mother was a sharp increase in management expenses. The company won the bid for the Qian'an Sponge City PPP project in May, with a total investment of 1.12 billion yuan. The project company is currently set up. The project company is expected to confirm revenue in the fourth quarter, and the annual results will be worry-free; additional funding will ease pressure and accelerate industrial layout: In July 2016, the company announced a plan to raise no more than 4.856 billion yuan. After the issuance is completed, the controlling shareholder Huarongtai's shareholding ratio will exceed 30%, further stabilizing the controlling shareholder position. On the other hand, the pricing reference date is the first day of the issuance period. The controlling shareholder did not participate in the market inquiry process for the pricing of this offering, but promised to accept the market inquiry results. After deducting issuance fees, all funds raised will be used for Sponge City PPP construction projects, smart drainage system construction projects, and soil restoration projects. Financial forecasts and investment recommendations We maintain the company's net profit of 0.36, 2.85, and 472 million yuan respectively in 2016-2018. Without considering this additional EPS distribution, EPS will be diluted, but if this increase is taken into account, EPS will be diluted, but there is a lot of potential room for future profit growth in the company's fund-raising projects, and the performance is expected to improve significantly. The current valuation of comparable companies is 34 times in 17 years. Considering the company's scarcity and growth potential in the field of sponge city planning and construction, a 20% premium is given, or 40 times PE in 2017, maintaining a target price of 11.2 yuan, maintaining an “increase” rating. Risk indicates that the bidding for PPP projects is uncertain, and the number and speed of order execution will significantly affect the 2017-2018 performance; there may be uncertainty about capital raised through non-public stock offerings; due to factors such as macroeconomic conditions and the government's ability to pay, the construction progress and payment situation of the Sponge City project may fall short of expectations;