Matters: 1) The company released its 2017 semi-annual report, achieving operating income of 509 million yuan, a year-on-year increase of 8.93%; net profit of 27.395,700 yuan, -208.99%; and EPS-0.15 yuan/share, -208.76% year-on-year. 2) The company expects to achieve net profit of 32 million yuan to 42 million yuan from January to September 2017, and net profit of 344.16,600 yuan for the same period last year. Orders fell short of expectations, and revenue for the second quarter declined month-on-month: order construction progressed slowly, causing the company's revenue growth rate to deviate from the industry average. The company achieved revenue/net profit of 509 million yuan/-27 million yuan in the first half of 2017, respectively, an increase of 8.93%/-208.99% over the previous year. On a quarterly basis, the company achieved revenue of 177 million yuan/332 million yuan respectively in Q1 and Q2 in 2017; the same increase was 62.06%/-7.29%, respectively, and Q2 revenue was -7.26% month-on-month. Affected by the slow progress of the company's main orders, operating income continued to decline month-on-month. At the same time, due to the uncertain impact of construction contract disputes on the Nanchong project and the Liupanshui Foreign Language School project on the company's performance in the first three quarters, the company had an estimated loss of 32 million yuan to 42 million yuan from January to September 2017. Profit declined due to changes in business structure, high financial costs, and loss due to impairment of high assets: 2017 H1 had a relatively high share of municipal integrated construction projects, and there were few landscaping projects with high gross profit, resulting in the company's current gross margin of 20.54%, a sharp drop of 10.97pct from the same period last year; the company's financial expenses continued to rise, mainly due to a marked rise in group financing costs, which increased to 8.85% from 7.09% in 2016 to 8.85%. In August 2017, the company extended the 250 million yuan loan period for 1 year, and added 200 million yuan for 3 months. The cost of financing is rising. At the same time, in recent years, the company has prepared a large amount of impairment of accounts receivable, mainly because revenue for projects such as Fengcheng in Jiangxi fell short of expectations. In the mid-term from 2016 to 17, the company estimated impairment preparations for the Jiangxi Fengcheng project of 36.81 million yuan and 54.28 million yuan respectively. The Jiangxi Fengcheng project has already been fully calculated. With increasing environmental protection and municipal business, performance in the second half of the year is expected to improve: the company is actively transforming to environmental management and ecological restoration, while also actively participating in municipal infrastructure construction projects such as sponge cities, city parks, improving the living environment, and municipal roads. It has successfully achieved the 1.32 billion yuan Suining Sponge City PPP project, the 718 million yuan Chuxiong financing project, the 710 million yuan Baoshan road construction project, and the 147 million yuan Tonghai sewage treatment PPP project. Construction of these projects began in the 2nd quarter of 2017, and is expected to enter the peak construction season throughout the year, which will help improve performance throughout the year 。 The matter of non-public stock issuance is still progressing, and it is hoped that the company will successfully obtain approval: in September 2015, the company initiated the non-public stock offering. The company plans to issue no more than 59.3081 million shares and raise no more than 720 million yuan in shares to the Cloud Investment Group, the Employee Stock Ownership Plan, and the Royal Fortune Plan. In November 2016, the company's non-public offering of shares was reviewed and approved by the Securities Regulatory Commission. In August 2017, the company issued the “Special Instructions on Post-Conference Matters for Non-public Stock Issuance”. It is hoped that the company will successfully obtain approval. If the company's non-public offering succeeds, it will significantly improve the company's capital structure. The company's balance ratio is expected to drop to about 55%, and the loans entrusted by the group are expected to be reduced by 470 million yuan, which is expected to save 41.595 million yuan in annualized interest expenses (calculated according to the latest loan interest rate of 8.85% /year). Investment advice: Lower performance estimates and maintain a buy-A rating. Due to the characteristics of the company's 2017 H1 business structure, gross margin declined. Its debt ratio was too high and financing functions were limited, and short-term financing costs continued to rise. At the same time, the revenue collection for the Fengcheng project in Jiangxi fell short of expectations, leading to significant bad debt charges. We lowered the company's performance estimates. The revenue growth rate for 2017-2019 is 80%, 45% and 35%, and the net profit is 110%, 167%, and 54% year-on-year. The company's core focus is on state-owned enterprise reform. Through the non-public offering, the company will realize the majority shareholders' debt-for-equity swaps and employee shareholding plans. If the non-public offering is completed, it will consolidate the majority shareholders' control over the company and achieve incentives for core employees. At the same time, the company is the only holding and listing platform under the Cloud Investment Group. At the end of June 2017, the company's total assets accounted for 1.65% of the group. It is a typical large group of small companies, and there is plenty of room for state-owned enterprise reform. Maintain the company's buy-A investment rating, and maintain a target price of 29.05 yuan for 6 months, corresponding to 76 times PE in 2017. Risk warning: State-owned enterprise reform falls short of expectations, PPP progress falls short of expectations, project repayment risks, litigation and arbitration risks, etc.