Key investment points: 17H1 has revenue of 510 million yuan, net profit of the mother - 27.4 million yuan. The company's 17H1 achieved operating income of 510 million yuan, +8.9% year-on-year, realized operating profit of 24.32 million yuan, a year-on-year decrease of 73.16 million yuan, and net profit of net income of 27.4 million yuan, a year-on-year decrease of 52.53 million yuan. The company expects net profit loss of 32 million to 42 million yuan in the first three quarters of 2017, compared to a profit of 34.42 million yuan for the same period in 2016. The decline in performance was affected by many factors, including business progress falling short of expectations, and a sharp increase in financial expenses and asset impairment losses over the same period last year. Losses were caused by multiple factors, and losses were still anticipated for the first three quarters. 1. Major orders progressed slowly: Affected by the slow progress of the company's main orders, the company's 17H1 revenue grew by only 8.9% year-on-year, of which 17Q2 revenue was 330 million yuan, -7% year-on-year, and the growth rate fell 69pct from Q1; 2. Business restructuring, gross margin declined: the proportion of the company's 17H1 high-margin greening projects decreased, and the share of low-margin municipal integrated construction projects increased by about 11pct to 20.5%; 3. Increased financing costs: Group loan interest rates increased from 7.09% in 2016 to 4.85%; Asset impairment has risen sharply: 17H1 has prepared a large number of accounts receivable impairment preparations, and the Jiangxi Fengcheng project receivable lost 54.28 million yuan due to full accrual; 5. The contract dispute case has not yet been decided: Currently, the construction contract disputes for the Nanchong project and the Liupanshui Foreign Language School project have not been decided, and the impact of the results on the performance of the first three quarters is uncertain. Based on various factors, the company's net profit for the first three quarters of 2017 had an estimated loss of 32 to 42 million yuan. Actively transforming environmental protection+municipal administration, and looking forward to performance improvements in the second half of the year: the company has comprehensive engineering qualifications and strong technical strength. Relying on the majority shareholder Cloud Investment Group to actively promote transformation, expand environmental protection projects for environmental management and ecological restoration, and municipal infrastructure projects such as sponge cities and municipal roads, 15 new project orders were added in the first half of the year, with a total amount of 716 million yuan, and won the Tonghai Sewage Treatment PPP project (147 million). In addition, it has also obtained the Suining Sponge City PPP project (1.32 billion), Chuxiong financing project (718 million yuan), and mountain road construction projects (718 million). Projects (710 million) We expect that construction of most of the projects is expected to begin in 17Q2. Considering the characteristics of the environmental protection engineering industry, the first half of the year is generally a project expansion period, and the second half of the year will enter the peak project implementation season. We look forward to the company's project settlement in the second half of the year, which will help improve the company's annual performance. A fixed increase will reduce leverage, so we should pay attention to the progress of national reform. The fixed increase plan was approved by the Securities Regulatory Commission in November 2016. On August 26, the company issued the “Special Instructions on Post-Conference Matters Concerning Non-public Stock Issuance”, which expects the company to successfully obtain approval. If the fixed increase is successful, the balance ratio may drop to about 55%. Considering the current 8.85% loan costs, the financial costs will drop significantly. The company is the only listing platform under the Cloud Investment Group. According to the company's website, as of June '17, the company's assets accounted for only 1.6% of the group. A typical small company group is a large group. The company is positioned as a large group ecosystem platform, focusing on the advancement of Yunnan's national reform, and future company benefits. Profit forecasting and valuation. The company's EPS for 17-19 is expected to be 0.35/0.94/1.26 yuan, respectively. We believe that the company's active transformation will result in performance losses due to various factors. Future fixed growth will reduce the company's financial expenses, and is expected to benefit from ecological restoration, PPP and local national reforms. Performance is expected to continue to grow. The compound growth rate of 17-19 performance can reach 91%, and the company's market value is small. PEG is only 0.6. Therefore, the PE valuation is 55 times the company's overall performance in 2017. The corresponding target price is 19.25 yuan, maintaining the “increase in holdings” rating. Risk warning: New business development is poor; state-owned enterprise reform is not progressing as expected; and the level of improvement falls short of expectations.