Brief review of the incident Recently, Mr. Zhang Lei, the controlling shareholder and actual controller of the company, increased his holdings of the company by 8.13 million shares, accounting for about 0.56% of the public share capital, with an average increase of 7.18 yuan/share. Management analysis H1 performance also increased by 43%, and endogenous growth accelerated. 1) The company expects H1 performance of about 308-370 million yuan in 2018, with an increase of 30% to 56%. Among them, the Q1/Q2 performance growth rate is 67%/31%, the deducted non-performance growth rate is about 243-300 million yuan, and the same increase of 5% to 31%. Among them, Q1/Q2 deducted non-performance growth rate is 4%/25%, and endogenous performance is accelerated. Q2 non-recurring profit and loss is about 66 million yuan, mainly due to urban planning, storage and auctions. 2) The company is mainly engaged in auto parts and gardening. In 2017, the company's auto parts/garden business accounted for 32%/68% of revenue. ① In 2018, the cumulative production/sales volume of H1 automobiles also increased by 3.5%/5.6%. Steady downstream growth+import substitutation+increase in bicycle supporting value promoted steady growth in the auto parts business. ② As of 2018, the company's current orders (including winning bids) reached 5.76 billion yuan, and the order revenue ratio reached 2.24 times. In 2018, the company signed a new framework agreement of 11.65 billion yuan. The implementation of the future framework agreement will enhance the company's performance. The company's overall risk is manageable, stock prices are bottoming down, and marginal credit easing promotes valuation repair. 1) Previously affected by Oriental Garden's failure to issue bonds, since May 21, the cumulative decline in SW garden projects has reached 20%, and many garden companies have suspended trading. According to a report from Yicai.com, the central bank window guides banks to increase the allocation of credit bonds below “AA+”, giving MLF additional financial incentives, and increasing sector valuations due to marginal credit easing. 2) In Q1 2018, the company's balance ratio was 58%, slightly lower than the overall balance ratio of the industry (62%), and the overall risk was manageable; in Q1, the company's revenue increased 21%, and net cash flow from operating activities was 200 million yuan, -19% year-on-year, improving operating cash flow; on July 16, 2018, the company's convertible bond application was approved, and the company plans to issue no more than 700 million yuan of convertible bonds for three PPP projects (investment amount of about 1.5 billion yuan). If successfully issued, it will greatly ease the pressure on financing companies. 3) At this stage, the company's equity pledges account for about 52% of the A shares in circulation. According to the announcement data, the maximum closing cost is 5.63 yuan, and the overall pledge risk is manageable. 4) According to the company announcement, the stop-loss line of the company's employee shareholding plan is 7.33 yuan; the average shareholders' holdings increased by 7.18 yuan/share; the company's current PE (TTM) is only 16.8 times, the lowest historical valuation is 14.7 times. We believe that employee holdings and major shareholders play a certain supporting role in the company's stock price. The company's stock price is bottoming down, and credit margin easing promotes valuation repair. The investment proposal company has implemented equity distribution, and we should lower the target price to 10.75 yuan (18*2018EPS). Risk warning: rising interest rates, risk of lifting the ban on restricted stocks, risk of inventory impairment, and PPP implementation falling short of expectations.