Events:

The company issued the 2017 e-cloth report that in the first half of the year, the company realized revenue of 295 million yuan, an increase of 41.29%, and a net profit of 30.51 million yuan, an increase of 101.79%.

Comments:

The rate of management expenses has been greatly reduced, and the performance has increased significantly. The company had more orders on hand at the beginning of the year and full construction in the first half of the year, and its revenue increased by 41.29% compared with the same period last year. This is mainly due to the large number of orders on hand at the beginning of 2017 and full construction in the first half of the year, resulting in the growth of landscape construction business. The gross profit margin of the current period has declined, falling to 24.35% from the same period last year, but still higher than 24.02% of H2 last year. The rate of management expenses for the current period dropped sharply to 11.38% from 14.61% in the same period last year, leading to a decrease of 3.76pct to 12.73% during the period; the net interest rate for the current period increased significantly to 10.33% from 7.23% last year; and the net cash flow of operating activities increased from 28.78 million yuan to 129 million yuan last year, mainly due to the decrease in cash-to-cash ratio and the increase in cash-to-cash ratio.

Embracing PPP to get a large order, the acquisition of Zhejiang Hongjun Construction opens the road of extension. From 2016 to the date of listing, the company signed a large contract of 611 million yuan, and the order reserve was slightly thin. after listing, with a strong financing capacity, it successfully won the PPP project of Qilihe (Anxing River) constructed wetland project in Mudan District, Heze City, with a project amount of up to 353 million yuan, which greatly enriched the contract on hand and ensured the company's performance. The company announced the acquisition of Zhejiang Hongjun Construction, upgrading the second-level qualification of the company's original municipal public works construction general contracting and the third-level construction general contracting qualification to one level, which is conducive to the company to further expand the business channels and scope of business. After listing, the company continues to act, using the financing capacity of the listed platform to expand PPP business and epitaxial growth, we believe that the company will embark on the road of high growth.

Complete the first phase of employee stock ownership, equity incentive planning. The first phase of the company's employee stock ownership plan has completed the stock purchase, with a total purchase of 2.4727 million shares, with an average price of 38.652 yuan, with a transaction amount of 95.5761 million yuan, and the purchase price is slightly higher than at present. The company announces that it is planning an equity incentive plan for directors, senior executives, middle managers, core technical personnel and business backbones serving in the company, and the price is 50% of the highest daily average price of 120kg, 60kg, 120. we believe that the incentive price difference is large, the motivation is sufficient, and the performance is expected to continue to be released. (including related expenses), accounting for about 2.47% of the total share capital of the company.

Financial forecast and valuation: we forecast that the company's operating income in 2017-2019 is 8.10,11.27,1.57 billion yuan, EPS is 1.05,1.49,2.06 yuan respectively, corresponding to PE is 38X, 27x, 19x respectively, covering for the first time and giving "overweight" rating.

Risk hint: the landing of the project is not as expected and the payback is not as expected.