Key investment points: The first horticultural stock. Shanghai Walsh Horticulture Co., Ltd., formerly known as Shanghai Walsh Horticultural Products Manufacturing Co., Ltd., founded in 2003, currently focuses on R&D, production and sales of horticultural products, taking into account horticultural design, engineering construction and greening maintenance. The main products cover four major horticultural products series, including hand tools, decoration, irrigation, and machinery, and is currently the first horticultural stock in Shanghai and Shenzhen. It is proposed to enter the upstream gas industry through mergers and acquisitions. The company disclosed the “Significant Asset Purchase Report” on January 10, 2018. It plans to purchase 48.88% of CNOOC Wobang's shares by a combination of issuing shares and paying cash, thereby controlling 50.36% of CNOOC's shares and holding 35.65% of CNOOC's shares. The restructuring includes two parts: (1) paying cash to buy 27.20% of CNOOC's shares; (2) issuing shares and raising supporting capital to purchase 21.68% of CNOOC's shares, with a total transaction consideration of 2199.6 billion yuan. Counterparties Shanxi Huijing, Shanxi Ruilong, and Borui Tiansheng promised that CNOOC Wobang's net profit after deducting non-recurring profit and loss in 2017-20 was not less than 30960, 36220, 454.5, and 555.6 million yuan, respectively. In 2016, CNOOC Wobang achieved operating income and net profit of 363 million yuan and 113 million yuan respectively, up 56% and 144% year-on-year respectively. By signing a production sharing contract (PSC contract), CNOOC has cooperated with China Petroleum to explore, develop, produce and sell natural gas in the Shilou West Block. It is estimated that the gas production volume is 1.2 billion cubic meters in 2021. Against the backdrop of growing demand for natural gas in China and a shortage of gas sources in the north in winter, we expect CNOOC's performance to grow steadily, bringing increased performance to Walsch Co., Ltd. The listing broke through horticultural production capacity limits. Currently, the global horticultural market is mainly concentrated in Europe and America. Wasp's product positioning is accurate, products are mainly exported, and customers are also concentrated in Europe and America. In the future, with the advancement of urbanization and aging in China, demand in the domestic horticultural products market will continue to rise. The company's June 2015 IPO raised a total of 150 million yuan in net capital, mainly for product development and program design center construction, production base technical transformation, marketing network construction, etc. After the project is delivered, it will help the company break through production capacity limits. Coupled with the company's focus on R&D and brand autonomy, it is expected to drive a continuous increase in gross margin and market share. Profit forecasting and valuation. Regardless of this restructuring, the company is expected to achieve net profit of 10, 1758, and 22.7 million yuan attributable to the parent company in 2018-2020, corresponding to EPS of 0.16, 0.29, and 0.37 yuan/share, respectively. Assuming that the company completes all 48.88% of the acquisitions by the end of 2018, and the issue price of supporting capital raised in 2019 is also 30.03 yuan/share, then 9.86 million shares will be issued. In addition to the amount of shares issued and paid, a total increase of 32.4872 million shares, bringing the total share capital to 94 million shares. Considering the increase in restructuring performance and the dilution of issued shares, net profit attributable to 2018-2020 was 0.10, 1.80, and 221 million yuan respectively, corresponding to EPS of 0.11, 1.91, and 2.35 yuan/share, respectively. Referring to comparable company valuations and the company's high gross profit margin, the company was given 20 times PE in 2019, corresponding to the target price of 38.2 yuan, giving the company an increase in holdings rating. Risk warning. (1) The asset restructuring progress did not meet expectations or was unsuccessful; (2) the performance of the target company of the acquisition did not meet the promises; (3) gas field gas production fell short of expectations; (4) the RMB exchange rate was high, and the company's exchange losses increased.