Event: according to the company's announcement on the 30th, the company's 2017H1 achieved revenue of 1.046 billion yuan, an increase of 0.53% over the same period last year, and a net profit of 53.19 million yuan, an increase of 15.61% over the same period last year.

Core ideas:

The environmental change performance of the education distribution industry declined slightly, and the growth of the food sector was stable. The company's 2017H1 achieved a revenue of 1.046 billion yuan, of which the education distribution sector faced a series of challenges, such as the qualification declaration for the distribution of teaching materials, the recycling of free teaching materials, and the arrival of books before class, resulting in a slight decline in revenue of 5.78%, a revenue of 513 million yuan and a gross profit margin of 18.64%, which increased 2.32pct compared with the same period last year. The food sector achieved revenue of 532 million yuan, an increase of 7.48% over the same period last year, of which the frozen food sector with the highest revenue accounted for 377 million yuan, an increase of 17.11% over the same period last year. The food sector achieved a gross profit margin of 9.99%, a decrease of 3.07pct over the same period last year. The decline in gross profit margin is mainly due to the sharp rise in pig prices this year, and the impact of H7N9 on the production and marketing of chicken seedlings, resulting in a decline in the gross profit margin of the company's poultry and breeding pig sales business. During the reporting period, the company recognized investment income of 9.68 million yuan, mainly from bank wealth management products and joint venture investment income. The company's sales and management expenses remained stable, and financial expenses decreased by 28.4% compared with the same period last year. Compared with the same period last year, Hongxin small loan Company, which owns 30 per cent of the company, reversed its losses, with a net profit of about 500000 (- 53.21 million in the same period last year). The turnround of the associated enterprises is expected to boost the company's performance light.

With the acceleration of the reform of state-owned enterprises in Guangdong Province, the leader of the cold chain of meat food is expected to accelerate the integration. In recent years, the reform of state-owned enterprises in Guangdong Province has achieved remarkable results in such aspects as "classified reform and development, striving to create a number of industry singles champions, and reducing the management chain." Guangdong Province has the advantage of being at the forefront of reform and has high hopes in deepening the reform of state-owned enterprises. As a pioneer in the reform of state-owned enterprises, the group introduced private capital as early as 2015 (Xin Jinan and Languang acquired a 49% stake in Guanghong assets, the controlling shareholder) and carried out shareholder-level mixed reforms. At present, in the process of further promoting the reform of state-owned enterprises, under the background of the requirements of strengthening, optimizing and expanding the state-owned capital, Guanghong Holdings strengthens the integration of channel resources around the book distribution business, which is one of the company's main businesses. Holding joint venture enterprises so as to achieve the integration of educational resources and strengthen, optimize and expand. We believe that as the leader of frozen meat food in Guangzhou and the leading enterprise in the field of provincial frozen food business, the company is expected to upgrade its production capacity by virtue of the demolition and upgrading of the food plate in 2018 on the one hand, and become a leading food cold chain enterprise in Guangdong Province and even in China. On the other hand, it is expected to fully integrate resources and give full play to the leading radiation effect. Under the experience of classified management and creating a number of industry champions, it is expected to further integrate the resources of the industry chain. Therefore, we are optimistic that the company, as an active participant in the reform of state-owned enterprises, will actively strengthen and expand education-related business and frozen food business.

In the medium to long term, the activation of land value provides a safety cushion for valuation: the implementation opinions of the Guangzhou Municipal people's Government on raising the level of Urban Renewal to promote Saving and intensive Land use adopted in February this year shows that under the policy guidance of Guangdong Province on raising the level of "three old" transformation to promote saving and intensive land use companies, the transformation of the three old in Guangzhou and Guangdong Province is expected to be further promoted. At present, three pieces of land have been included in the process of three old transformation: the ① Guangzhou West Village site (97 mu) is located near the old city of Liwan, and the company is expected to receive RMB 323-4.04 billion according to the government reserve calculation (the company's accounting value: RMB 98 million; assuming that it is divided according to 50,000 / ha, 2.5x volume ratio, 40-50%). ② company Zhongshan Tanzhou land (200mu), has completed three links and one flat, and is in a vacant state, asset activation is expected to speed up; Foshan Nanhai land (1200 mu) is also expected to be revitalized, thickening the company's value safety pad. Under the accelerated environment of the three old transformation policies in Guangdong Province and Guangzhou, the company is expected to revitalize the land involved in the reform, so as to provide the company with a medium-and long-term valuation safety cushion.

Profit forecast and valuation: the company's net profit for 2017-2019 is expected to be 1.44,1.57 and 191 million yuan, corresponding to 0.25,0.27,0.33 yuan per share for 2017-2019EPS, and the previous share price valuation is 36,33,27 times PE respectively. We believe that the company's main business is growing steadily, and we are optimistic that the reform of state-owned enterprises will benefit from the reform of state-owned enterprises, the sound valuation of the main business is reasonable, and the transformation of the three old enterprises will be accelerated to provide a valuation safety cushion and maintain a strongly recommended rating.

Risk tips: the relocation of frozen food business is not up to expectations, the book distribution business is declining, and the process of land revitalization is not up to expectations.