Key investment points Liberal Arts Garden released its 2018 semi-annual report: In the first half of 2018, the company achieved operating income of 1,380 billion yuan, an increase of 20.02% over the previous year; net profit of 130 million yuan, an increase of 25.48% over the previous year. Among them, Q2 revenue was 966 million yuan, an increase of 12.17% over the previous year, and realized net profit of 114 million yuan, an increase of 22.80% over the previous year. On a quarterly basis, the company's Q1 and Q2 revenue increased by 43.41% and 22.80% respectively over the same period in 2017. The revenue growth rate in the second quarter clearly slowed down, which may be related to the further tightening of the private enterprise financing situation and the slowdown in project progress. By business, the company's landscape engineering contributed 96.09% of the company's total revenue. The company achieved a comprehensive gross profit margin of 18.73% in the first half of the year, an increase of 0.19% over the same period in 2017. The company's gross margin is slightly lower than that of other garden companies, mainly because the company's garden business also includes some real estate and garden businesses. The company's expenses accounted for 7.01% in the first half of the year, up 0.81% from the same period in 2017, mainly due to a significant increase in the share of financial expenses. Asset impairment losses accounted for 0.97%, up 0.03% from the same period in 2017. The net interest rate was 9.41%, up 0.41% from the same period in 2017, mainly because the company received government subsidies and the share of other earnings increased (+0.67pct). The company's net operating cash flow per share for the first half of 2018 was -0.40 yuan, a year-on-year decrease of 0.11 yuan, which was worse than the same period in 2017, mainly due to a sharp decline in the earnings ratio. In the first half of the year, the company achieved revenue ratio and payout ratio of 58.90% and 67.47% respectively, down 9.32% and 11.93% from the same period last year. The sharp decline in the cash-to earnings ratio is the main reason for the deterioration in the cash flow situation. Profit forecast: We adjusted the company's 2018-2020 EPS to 0.58 yuan, 0.70 yuan, and 0.85 yuan respectively. The PE corresponding to the closing price on August 23, 2018 was 12.3 times, 10.2 times, and 8.4 times, maintaining the “prudent increase in holdings” rating. Risk warning: real estate regulation risks, PPP industry policy adjustment risks, new orders falling short of expectations, project financing and order execution falling short of expectations, worsening cash flow conditions