Main points of investment

The company's operating income in the first half of 2016 was 1.098 billion yuan, down 4.14% from the same period last year. Due to the downward pressure of the economy, fluctuations in the real estate market, local government regulation and other external factors, the number of newly signed orders decreased, resulting in a decline in the scale of revenue from landscape engineering and design business. 1) from a quarterly point of view, the company's operating income in Q1 and Q2 reached 435 million yuan and 664 million yuan respectively, up 7.14% and-10.33% respectively over the same period last year. 2) from the point of view of denominator and subsidiary, the income of parent and subsidiary was 992 million yuan and 106 million yuan respectively, an increase of-10.6% and 19.3% respectively over the same period last year. The rapid growth of subsidiary income mainly came from the consolidation of Deep Blue Environmental Protection.

The company achieved a net interest rate of 6.67% in the first half of 2016, down 5.76% from the same period last year. The decline in net interest rate is larger than that of gross profit margin, which is mainly affected by the increase in expense rate during the period caused by cost rigidity: itemized, the company's sales expense rate is 0.31%, an increase of 0.31% over last year, which is mainly due to the sales expenses caused by Deep Blue Environmental Protection after the merger. The rate of management expenses was 10.45%, an increase of 2.03% over last year, mainly due to the decline in the scale of income and the impact of rigid expenditure on management fees and increased regional management costs; the rate of financial expenses was 1.23%, an increase of 0.73% over last year, mainly due to the increase in interest payments during the reporting period.

Judging from the balance sheet, the advance payment of the company increased by 64% compared with the balance at the beginning of the year, mainly due to the increase in environmental protection projects and environmental protection equipment and materials prepaid by the subsidiary Shenlan Environmental Protection during the reporting period. At the same time, other receivables increased by 96.3% over the beginning of the year, mainly due to the increase in bid deposits and current payments paid. Taking into account the active bidding and project start-up and the combined effect of deep blue environmental protection, we expect the company's performance to improve.

Profit forecast and rating. We estimate that the EPS of the company from 2016 to 2018 will be 0.09,0.12,0.15 yuan respectively, and the corresponding PE will be 79 times, 63 times and 50 times respectively.

Rating.