Matters: the company released its third-quarter report that operating income in the first three quarters totaled 535 million yuan, up 13.05 percent over the same period last year; net profit attributed to shareholders of listed companies totaled 50 million yuan in the first three quarters, up 62.00 percent over the same period last year; and EPS0.31 yuan in the first three quarters, an increase of 32.57 percent over the same period last year.

The profit growth rate in the first three quarters is relatively high, and the gross profit margin is robust: the company's cumulative operating income in the first three quarters of 2017 was 535 million yuan (up 13.05%). The company achieved a net profit of 50 million yuan (an increase of 62%), and the company's revenue and profit increased steadily, of which the profit growth rate was relatively high. we believe that the main reason is that the company's financial expenses have dropped significantly by 20.36%, and the sales expenses and management expenses have been well controlled. The overall gross profit margin is relatively stable.

Financial expenses decreased significantly and asset impairment losses decreased: in terms of period expenses, the company's sales expenses / management expenses / financial expenses in the first three quarters of 2017 were 11.0861 million yuan (16.31%), 58.0761 million yuan (35.69%) and 19.3922 million yuan (20.36%) respectively, of which the increase in management expenses was mainly due to the increase in the salary of the company's managers. Financial expenses are significantly lower than the same period last year, which we believe is mainly due to the completion of IPO and equity financing in 2017. In terms of asset impairment, the company's asset impairment loss in the first three quarters of 2017 was 8.0699 million yuan, compared with the same period last year. In terms of cash flow, the net cash flow generated by the company's operating activities in the first three quarters of 2017 was-202 million yuan,-494.25% compared with the same period last year, mainly due to the decline in business collection and the increase in procurement payments to suppliers.

There are plenty of orders on hand, covering a wide range of areas: since 2017, the company has announced orders (including framework agreements) totaling 6.184 billion yuan, which is 7.5 times the operating income of 826 million yuan in 2016. Among them, the total amount of the winning order is 2.684 billion yuan, and the amount of the framework agreement reaches 3.5 billion yuan. The company has enough orders on hand, covering many areas such as landscaping engineering, ecological wetland restoration, comprehensive management of river and lake environment, cultural tourism and so on. The coverage of hand-on-hand orders is relatively extensive, indicating that the company has a strong ability to obtain orders. Recently, the company announced once again that it has won the bid for the PPP project of the comprehensive renovation and development and utilization of the Yongjiang River, and signed the contract for the EPC general contract project of the comprehensive environmental renovation project of Nanxun Town. The landing speed of the company's orders has accelerated since the third quarter, and sufficient orders are on hand to ensure the company's future performance release.

Investment advice: buy-An investment rating, 6-month target price of 40 yuan. The company has plenty of orders on hand, and the layout of ecological restoration and cultural tourism, including water treatment, is expected to further open up the future growth space of the company. We are optimistic about the growth of the company. We expect the company's operating income to increase by 56.2%, 38.4% and 29.1% year-on-year from 2017 to 2019, while net profit will increase by 57.5%, 40.0% and 33.5% year-on-year, maintaining the company's buy-An investment rating with a six-month target price of 40 yuan, equivalent to a dynamic P / E ratio of 28.6 times in 2018.

Risk hint: the risk that the landing of the framework agreement is not as expected, the PPP advance is not as expected, the interest rate continues to rise and so on.