Event: The company released its 2018 semi-annual report on the evening of August 17: During the reporting period, the company achieved revenue of 342 million yuan, an increase of 429.99% over the previous year, net profit attributable to shareholders of listed companies of 24.5012 million yuan, an increase of 90.70% over the previous year, and realized a net profit of 24.5073 million yuan, an increase of 91.50% over the previous year. In this regard, our comments are as follows: Key investment points: After deduction, performance increased by 91.50%, and EPC business development was smooth. The company achieved revenue of 342 million yuan in the first half of the year, an increase of 429.99% over the previous year, net profit attributable to shareholders of listed companies of 24.5012 million yuan, an increase of 90.70% over the previous year, and achieved a net profit of 24.5073 million yuan, an increase of 91.50% over the previous year, in line with market expectations. The main reason for the sharp increase in the company's performance is that the smooth expansion of EPC has brought greater performance flexibility. By business, the new EPC achieved revenue of 268 million yuan, accounting for 78.36% of revenue; the design business achieved revenue of 74 million yuan (up 14.88% year on year), accounting for 21.64% (of which real estate landscape/ecological wetland/municipal garden/leisure vacations achieved revenue of 0.07/0.19/0.29/017 million yuan respectively). Although EPC accounts for a relatively large share of revenue, it accounts for only 32.13% of gross profit due to its low gross margin (only 7.78%). At the same time, affected by EPC's low gross margin, the company's overall gross margin fell to 18.98% from 57.51% in the same period last year. In terms of expenses for the period: sales expenses were 9,963 billion yuan, a decrease of 4.49% over the previous year; management expenses were 21.1206 million yuan, an increase of 40.66% over the previous year, mainly due to the expansion of business scale and the increase in management expenses such as labor costs; and financial expenses were -85,700 yuan, mainly because the funds raised were used to repay bank loans, and the company did not have large bank loans. Net operating cash flow for the first half of the year was -278.65 million yuan, a decrease of 431.23% over the same period last year, mainly affected by the expansion of EPC projects. Moving from design to EPC has advantages. Opening up new growth space The company has double A qualifications in landscape architecture and construction design. It has formed a good brand image with works such as the West Lake Comprehensive Conservation Project, Xixi National Wetland Park, the “G20 Hangzhou Summit”, and the “Xiamen BRICS Leaders' Meeting” core landscape design, etc., and is a leading enterprise in the landscape design industry. While consolidating the design business, the company gave full play to the design business, grasped the overall entry advantages of the project, and actively expanded downstream EPC, engineering, etc., with obvious advantages. In 2017, the company successfully undertook integrated design and construction services such as the Boao Agricultural National Park Phase I Project General Contracting (EPC), the Boao Corridor Landscape Enhancement Project (EPC), and the Boao Binhai Avenue Greening and Upgrading Project (EPC), etc., and the EPC business has developed smoothly. The design business generally only accounts for about 3-5% of the general contracting scale of engineering projects. Expanding the EPC business can greatly increase revenue levels and open up new growth space. In response to questions from investors on the interactive platform on June 13, the company said: Up to now, the total number of contracts in the company's hands is about 700 million yuan, including about 500 million yuan for design business and 200 million yuan for EPC engineering business. At the same time, in November 2017, the bank signed a credit line of 10 billion yuan. Sufficient on-hand orders and capital provided a guarantee for the company's high growth in future performance. Profit forecast and investment rating: Maintaining the company's “overweight” rating. We are optimistic about the company's brand advantages and the growth space brought by the expansion of EPC business. We raised the company's performance. We expect the company's 2018-2020 EPS to be 0.56, 0.70, and 0.83 yuan respectively, corresponding to the current stock price PE of 48, 38, and 32 times. Combined with current industry and market conditions, we maintain the company's “increased holdings” rating. Risk warning: risk of project expansion falling short of expectations, risk of significant increase in accounts receivable, uncertain risk of expansion into the engineering sector, risk of rising interest rates, downside macroeconomic risk.