Incident: The company announced that it achieved operating income of 1,951 billion yuan in the first half of the year, an increase of 15.36% over the previous year; realized net profit attributable to shareholders of listed companies of 104 million yuan, a year-on-year decrease of 17.22%. Comment: Q2 revenue increased sharply, gross margin declined slightly, and cash flow improved. The increase in the company's revenue in the first half of the year mainly came from the main decoration business. The decoration business grew 16.65% year on year. Looking at the second quarter, the year-on-year growth rate was 66.87%, which was significantly faster than the negative growth in the first quarter; the gross margin of the decoration business fell 2.62 pct to 17.26% in the first half of the year, causing the gross margin for the current period to fall by 3.56 pct to 20.39%; due to the increase in interest liabilities and interest expenses, the current period's financial expenses increased by 122.09% year on year, driving up 0.60 pct to 12.40% compared with the same period last year. 0.68 increased to 0.70, and the payout ratio dropped significantly from 1.08 to 0.91. Although the current operating cash flow was still negative, it has improved significantly from the same period last year. There are plenty of orders in hand, and the order structure is more optimized. The company signed about 2.8 billion new orders in the first half of this year (including orders that were not successful). By the end of the reporting period, 3,542 billion yuan of unfinished orders had been signed, which is 1.4 times the revenue of the decoration business last year, and sufficient orders guarantee the growth of the main decoration industry. At the same time, judging from changes in the product structure of orders, the proportion of cultural projects with the company's traditional advantage has been further increased. The share of hotel projects has increased significantly compared to 2016. Transportation hubs and hospital projects have all made major breakthroughs, the proportion of residential refinement projects is at a low level, and the number of integrated design and construction projects has increased. Various examinations have gradually resumed, and it is expected that Scholson's performance will improve. Affected by relevant policies last year, the situation of construction practitioner qualifications was unclear. A number of certification examinations for registered safety officers, registered supervisors, etc. were suspended, and Xuersen accordingly suspended the recruitment of new students related to such courses, leading to losses due to a decrease in operating income. At present, most of the suspended qualification training examinations have basically been fully resumed, and local branch schools are operating normally. It is expected that Xuelsen's performance will improve this year. Financial forecasting and valuation: We estimate that the company's operating income for 2017-2019 will be 36.77, 42.57, 4.716 billion yuan, net profit due to mother of 2.46, 3.26, and 398 million yuan, EPS of 0.20, 0.26, 0.32 yuan, and corresponding PE of 32X, 24X, and 20X, respectively, giving a “gain” rating. Risk warning: Scholson's performance fell short of expectations, and real estate investment declined beyond expectations.