Revenue continued to grow in '17, and net profit declined. The company achieved revenue of 3.262 billion yuan in 2017, an increase of 28.54% over the previous year. Reversing the continuous decline since 14 years ago: net profit was 371 million yuan, up 3.41% year on year, while net profit after deducting non-return net profit was 314 million yuan, down 10.59% year on year. It is mainly due to a significant increase in non-recurring profit and loss in '17 compared to 2016: at the same time, the company announced a profit distribution plan. It plans to distribute 1.8 yuan for every 10 shares and transfer 4 shares to 4 shares. The company's revenue growth was mainly due to the fact that the projects under construction in '17 achieved more work than in 16 years and the increase in asphalt concrete sales. However, due to rising construction project costs, the consolidated gross profit margin in '17 (12.6%) decreased by 2.52 pct compared to last year, and the net profit margin was 11.97%, down 3.94% year on year. The company's expense ratio for the 17-year period was 3.7%, a year-on-year decrease of 2.9%. Among them, the sales expense ratio, management expense ratio, and financial expense ratio were 0.25%/3.7%/-0.24%, respectively, +0.11% /1.6% /1.42% year-on-year. The high gross margin business is growing rapidly. Looking at the active expansion of the market layout outside the province, the company's construction project/asphalt concrete products/environmental protection business revenue was 30.38, 2.11, and 05 billion yuan, respectively, with year-on-year increases of 24%, 146%, and 59%, respectively. Traditional construction engineering business (6.31%) with low gross margin maintained steady growth, while asphalt concrete products (11.64%) and environmental protection business (34.89%) with higher gross margin grew rapidly, helping to improve overall gross margin levels. By region, the company's Shanghai/non-Shanghai region accounted for 85% and 15% of the company's revenue, respectively. The share of the business in Shanghai decreased by 7% in 2016, and the company achieved good results in expanding its business to regions outside of the province. The company will continue to be deeply involved in the Pudong New Area, actively explore the Yangtze River Delta region, and expand into regional markets outside the Yangtze River Delta. The number of new orders signed in '17 increased 17% year-on-year, and the in-depth development of the industrial chain brought new growth. According to the annual report, the amount of new projects signed by the company in '17 was 6.226 billion yuan, an increase of 17.41% over 2016. Among them, the newly signed projects for infrastructure, housing construction, and other businesses were 23.78 billion yuan, 14.24 billion yuan, and 2,423 billion yuan respectively, up -48%, 107%, and 5488% from the previous year, respectively. The revenue ratio of the company's outstanding orders is 3.76. The company's annual report predicts that it will achieve operating income of 4,097 billion yuan in 2018, an increase of about 26% over the previous year, and an estimated cost of 3.464 billion yuan. Based on an estimated net profit rate of 12% in 2017, it is expected to achieve net profit of about 500 million yuan in 2018. The company's infrastructure orders have declined, while housing construction and other business orders have grown rapidly, and the trend of diversification of the company's business structure is obvious. In addition, the company has expanded upstream in the industrial chain in the field of traditional construction, gradually changing from a traditional construction enterprise to an “investment builder” for municipal infrastructure, and is actively transforming into an “investment and construction operator”. The operating model has changed from a BT model to a PPP model. In the future, the company will vigorously develop projects such as sewage treatment, integrated pipe galleries, parking lots, highways, and new energy. Various financing channels provided financial support, and technology research and development enhanced comprehensive strength. The company issued the first and second installments of corporate bonds in March '17 and March '18, respectively, raising capital of 200 million yuan and 400 million yuan respectively. The company is actively exploring multi-channel financing methods. Currently, the company has successfully achieved financing in the three major financing systems of banks, securities and insurance, providing sufficient funds for the diversified development of the company's business. In 2018, the company plans to apply for loans of no more than RMB 1.5 billion from financial institutions. In terms of research and development, the company has strong technical strength in road construction. In particular, it is in a leading position in the industry in new pavement materials and technologies such as asphalt pavement recycling. With the above technological achievements, the company will have a clear advantage in entering municipal business, and the company's comprehensive strength is expected to continue to increase. Profit forecast and investment rating The basic assumptions for profit forecasting are as follows: (1) Operating income: The company's new orders in 16 and 17 were 5.302 billion yuan and 6.226 billion yuan respectively. Considering that the order conversion cycle is generally between 1-2.5 years, based on the company's order size, we expect the company's revenue to continue to grow steadily in the next three years: (2) Gross profit margin: the company's comprehensive gross margin for 17 years is 12.6%. As the share of investment business, environmental protection business, asphalt concrete business, etc. business increases, the company's comprehensive gross margin is expected to rise to 13%-15%: (3) Period cost rate: the company's 17 The period fee rate was 3.7%, down 2.9% from 2016, while the company issued 200 million yuan and 400 million yuan bonds with interest rates of 4.46% and 5.53% respectively. Financial expenses have increased, and the overall period rate may be adjusted to a certain extent in the future. With rich infrastructure investment and construction experience and industry-leading technology, the company is expected to explore new growth points through industrial diversification and in-depth development, and ensure the sustainability of performance growth by developing markets outside the province. The company has developed financing channels through three major financing systems to provide sufficient capital reserves for business development. In the future, it is expected that the PPP model will be used to open up the entire industry chain of project investment, construction and operation, and transform from a single construction unit to a management operator for the entire life cycle of the project. We estimate that the net profit of the company in 18-20 will be 4.38, 4.85, and 536 million yuan respectively, and the EPS corresponding to 18-20 years will be 0.63, 0.70, and 0.77 yuan respectively, corresponding to PE 14 times in 2018. As an infrastructure group under the control of the Pudong State Assets Administration Commission, the company is expected to benefit from the dividends of state-owned enterprise reform and be given a “prudent increase in holdings” rating for the first time. Risk warning: Project execution falls short of expectations; infrastructure investment growth rate slows down; project payback falls short of expectations; construction costs rise; return on investment business reduces risk, etc.