The company recently released its 2017 annual report. It achieved annual revenue of 935 million yuan, an increase of 58.12%; realized net profit to mother of 230 million yuan, an increase of 77.51%. At the same time, the profit distribution plan was announced in the annual report. It is proposed to distribute 5 yuan in cash shares for every 10 shares, use the capital reserve fund to increase the share capital, and increase 8 shares for every 10 shares. The reviews are below. Expanding the scope of business and opening up markets outside the province, saw a sharp increase in revenue. In 2017, the company's revenue increased significantly. The same increase of 58.12% to 935 million yuan, and the exploration business, which accounts for about 79%, also increased by 83.13% to 739 million yuan, which is the main reason for the company's high revenue growth. During the reporting period, the company continued to deeply cultivate the market in Henan Province. The advantages of traditional highway business were consolidated, and the expansion results in the fields of municipal administration, rail transit, housing construction, etc. were remarkable. For example, it undertook iconic projects such as civil design for part of the section of Zhengzhou Rail Transit Line 12, and further improved its business structure. Outside of the province, the company undertook exploration and other services for a number of large-scale highway projects in Dian, Tibet, Gui, and Xin. The winning bid amount for the Tibet project alone reached 300 million yuan. The contract amount for projects outside the province and its share of total revenue increased markedly. It is expected that new growth points for the company's future performance will be in new fields such as outside the province, municipal administration, and rail transit. The company's overall gross margin in 2017 was 46.96%, up 2.18 percentage points from last year, mainly due to a 1.5 percentage point increase in the gross margin of the investment business, which accounts for high revenue, to 51.34%. With the overall recovery of the design industry, increased concentration, and the increase in design cost rates, we expect that the company's high gross margin level may be maintained. The expense ratio declined significantly during the period, and the high increase in net profit to mother continued the company's expense ratio of 13.45% during 2017, down 3.31 percentage points from the previous year. Among them, the cost sales expense ratio and management expense ratio decreased by 0.87 and 2.74 percentage points, respectively, mainly due to the rigidity of expenses and lower than the increase in revenue; the financial expense ratio was 0.67%, which increased slightly by 0.29 percentage points, due to increased interest expenses and exchange losses. Asset impairment losses were $32.16 million, an increase of 1440%, mainly due to bad debts, long-term equity impairment, and goodwill impairment losses. Taken together, in 2017, the company's net interest rate rose 1.91 percentage points year on year to 24.62%, achieving net profit to mother of 230 million yuan, an increase of 77.51%. The company's business situation continued to grow in the first quarter of 2018. The 2018 Quarterly Report predicts that the 2018 Q1 net profit growth rate of the company will be 20% to 40%, with an estimated profit of 4082.27 to 476.65 million yuan. Both current and current ratios declined. Operating cash flow could improve the company's revenue ratio of 0.82 during the reporting period, down 23.92 percentage points from the same period last year; the payout ratio decreased 14.12 percentage points to 0.6. In summary, the company's net operating cash flow in 2017 was -61.702 billion yuan, down 107.28% from the previous year's 84.701 million yuan. On the one hand, it was due to an increase in cash and labor costs for carrying out projects; on the other hand, the number of new contracts signed by the company increased during the reporting period, and the project repayment cycle was long. Investment proposal As a regional design leader, the company has significant advantages in undertaking large-scale projects in Henan Province, actively transforming projects to build a comprehensive service provider for the entire industry chain; the main business has grown steadily, and new businesses have opened up incremental space. According to the company's annual report, we slightly lowered our expense ratio for the period, and the EPS forecast was adjusted from 4.45 and 5.6 yuan/share to 4.61 and 6.17 yuan/share, and the 2020 EPS forecast was 7.77 yuan/share; the net profit from 2018 to 2020 was 3.32, 4.44, and 560 million yuan, respectively, corresponding to PE of 18, 14, and 11 times, maintaining the “increase” rating. Risk warning: The growth rate of fixed asset investment continues to decline; business growth outside the province and overseas falls short of expectations