1. Event Overview The company released its 2018 semi-annual report, with revenue of 4.938 billion yuan, up 76.7% year on year; net profit of 385 million yuan, up 42.9% year on year; net profit attributable after deduction of 379 million yuan, up 46.58% year on year. 2. Analysis and judgment that performance growth is in line with expectations. High-quality in-hand orders guarantee sustainable development is affected by macro-deleveraging and strict PPP regulations. The company's performance in the first half of the year maintained a relatively rapid growth rate, in line with the expectations of our previous report. Equity incentive expenses of 75.71 million were calculated during the reporting period. After factoring in this impact, net profit for the mother increased 71% year over year. Since 2018, the company has announced 16 projects with a total amount of 12.8 billion yuan, including 11 PPP projects, with a corresponding investment of 11 billion yuan, accounting for 86% of all projects. The company's PPP order storage rate in the first half of the year reached 75%. Nearly half of the contracts were concentrated in the field of ecology and environmental protection, and the project storage rate was high. The semi-annual report revealed that the total amount of new projects signed in the first half of the year was 11.617 billion yuan, and the total amount of projects that have won bids yet to be signed was 11.361 billion yuan, compared to 2,66/5.47 billion yuan in the same period last year, respectively. The company's orders maintained rapid growth in the first half of the year, which will lay the foundation for future performance growth. Profitability remained stable, and sales and financial expenses increased. The company's comprehensive gross profit margin in 2017 was 26.19%, net profit margin was 7.75%, +0.70%/-1.75% year-on-year, and the profitability of the ecological, environmental protection and municipal garden business remained stable. The sales/management/finance expense ratio is +0.61%/-0.47%/+1.25% respectively. The increase in the sales expense ratio is mainly due to the company's implementation of regional management and the sharp increase in personnel, which has increased operating costs; the doubling of interest expenses has led to a rapid increase in financial expenses. The tightening of financing has put a certain amount of pressure on cash flow. In the context of effective transmission of financing, the company is expected to improve in the later stages. During the reporting period, the company received 3 approved PPP project loans, with a total financing amount of 566 million yuan, while the upfront cost of the PPP project paid by the company during the reporting period was 1,957 million yuan. If social capital contributed 30%, the rest of the supporting bank loans, project financing in the first half of the year was greatly affected by macro-deleveraging. While the company is being occupied by downstream funds with long-term receivables, inventory, etc., it also uses upstream capital through accounts payable, but compared to being occupied by downstream, the upstream's ability to occupy capital is weak, resulting in a net cash inflow of 100 million yuan from operating activities, which is basically the same as the same period last year. The upfront costs of PPP projects were paid $1,957 million, resulting in a total cash outflow of $2.2 billion from investment activities. Obtaining loans received $2.36 billion in cash, repaying $775 million in long-term loans maturing within one year, and $500 million in payable bonds maturing within one year, resulting in a net inflow of 1 billion yuan in financing activities, a decrease of 30% compared to the same period last year. Furthermore, the debt structure was short, and the pressure on cash flow increased. The balance ratio was 70.54%, up 1.86% from the beginning of the year. If a high turnover of project capital cannot be achieved, the company's debt ratio may rise further. Fiscal policy in the second half of the year will be more active, and banks will also increase their support for private enterprises under policy guidance. Interest spreads on AA-level corporate credit bonds have narrowed since August. In the future, the financing pressure on the company itself and local urban investment platforms is expected to ease, and cash flow is expected to improve. 3. Profit Forecast and Investment Suggestions Taking into account the tightening of financing in the first half of the year and the impact of the company's asset restructuring on business development, the company's profit forecast for the next three years was slightly lowered. The EPS for 2018-2020 is expected to be 0.45, 0.56, and 0.68, respectively, corresponding to the current price of PE 12, 10, and 8 times. I am still optimistic about the steady release of the company's subsequent performance and maintaining the “recommended” rating. 4. Risk Warning 1. Fiscal policy implementation falls short of expectations; 2. Financing continues to be blocked; 3. Contract execution progress falls short of expectations.