Matters: the company released its third-quarter report that operating income in the first three quarters totaled 1.287 billion yuan, up 10.83 percent over the same period last year; net profit attributed to shareholders of listed companies totaled 111 million yuan in the first three quarters, up 20.99 percent over the same period last year; and EPS0.13 yuan in the first three quarters, an increase of 8.33 percent over the same period last year. The company expects to achieve a net profit of 170 million to 200 million yuan attributed to the parent company in 2017, an increase of 9.26% to 28.54% over the same period last year.

The company released the operating data of its subsidiary Huayu Garden in the third quarter of 2017. Huayu Garden signed four new contracts in the third quarter of 2017, totaling 1.681 billion yuan; by the end of the third quarter, a total of 93 unfinished orders had been signed, totaling 6.258 billion yuan.

Revenue and profit grew steadily in the third quarter, and the full-year results are expected to exceed expectations: the company's operating income in the first three quarters of 2017 was 1.287 billion yuan (up 10.83 percent), and its homing net profit was 111 million yuan (20.99 percent higher). In 2017, the company's Q1-Q3 realized operating income of 277 million yuan (23.26%), 518 million yuan (31.07%) and 492 million yuan (21.43%), respectively, and net profit of 2 million yuan (92.83%), 60 million yuan (80.68%) and 49 million yuan (39.32%) respectively. The growth rate of Q2 revenue and profit was at a high level for the whole year. At the same time, the company expects to achieve a net profit of 170 million to 200 million yuan belonging to the parent company in 2017, with a year-on-year growth range of 9.26% and 28.54%, slightly exceeding our previous expectations.

During the period, the cost control is better, and the asset impairment loss is reduced: in terms of profit margin, the company's gross profit margin / net profit rate in the first three quarters of 2017 was 15.95% (same as minus 4.28pct) and 8.65% (same as 0.71pct increase). The company's gross profit margin fell 4.28pct from the previous year, but the net profit rate improved 0.71pct slightly, mainly due to the improvement of 3.12pct during the company's period compared with the previous year, and good expense control. In terms of period expenses, the company's sales expenses / management expenses / financial expenses in the first three quarters of 2017 were 21.2394 million (17.95%), 74.3708 million yuan (1.98%) and-24.1087 million yuan (451.5%), respectively. The main reason is that the interest income of long-term receivables in the garden business of the company has increased a lot. In terms of asset impairment, the company's asset impairment loss in the first three quarters of 2017 was 4.4002 million yuan, a sharp decrease of 67.25% over the same period last year, mainly due to the reduction of the company's current accounts receivable corresponding to the reduction of provision for bad debts. In terms of long-term receivables, the company's long-term receivables in the first three quarters of 2017 was 2.063 billion yuan, an increase of 59.61% over the same period last year, mainly due to the increase in the construction progress of PPP projects in this period.

Huayu Garden has sufficient orders on hand, and the project promotes the growth smoothly: the company's subsidiary Huayu Garden's main business is mainly municipal engineering and ecological greening project construction, and actively explore the extension to the field of ecological restoration. The company said in this announcement that Huayu Garden had signed a total of 93 unfinished orders by the end of the third quarter, with a total amount of 6.258 billion yuan. judging from the progress of the key projects in the announcement, the more 2.91 billion yuan projects in Huayu Garden have not started, and about 3.348 billion yuan projects are under construction, which will provide protection for the company's performance release this year and next year. At the same time, since 2017, Huayu Garden has respectively signed the investment framework agreement for the construction project of Gouba Red Culture Tourism Innovation Zone in Zunyi and the contract for comprehensive ecological restoration (Phase II) project in Xixiu District, Anshun City, etc., with the business extending to the direction of ecological environmental protection and cultural tourism, the company is expected to expand to the garden plus with the help of PPP project experience.

Investment advice: buy-An investment rating, raise the target price to 7.2 yuan. The company's revenue and profit grew steadily in the third quarter, exceeding our performance prediction. at the same time, the subsidiary Huayu Garden has sufficient orders on hand, and the smooth start of key projects will help the company's performance release, and the annual performance is expected to be close to the upper limit of the company's forecast range; we have raised the company's performance forecast, and revenue growth from 2017 to 2019 is expected to be 14.6%, 22.0% and 21.0%, respectively. The growth rate of net profit is 18.9%, 29.6% and 25.6% respectively. To maintain the investment rating of Buy-A, the target price for six months is 7.2 yuan, which is equivalent to 26.7 times the dynamic price-to-earnings ratio in 2018.

Risk hints: PPP promotion slows down, construction progress is not as expected, bad debt risk and so on.