Event

The company announced its semi-annual report of 2018 that its revenue in the first half of the year was 140 million yuan, an increase of 7.86% over the same period last year, and its net profit was 8.2616 million yuan, an increase of 35.23% over the same period last year.

Brief comment

Dalian / Harbin project has sound operation and improved profitability.

The company's income comes from Dalian and Harbin projects and maintained steady growth during the reporting period. The company reversed its performance in Q2, with revenue and net profit reaching 98 million yuan and 17.1401 million yuan respectively, a year-on-year growth rate of 15.07% and 9.76%, respectively. At the same time, Q2 had a net cash inflow of 29.4532 million yuan. Specifically, the main growth driver of the company's performance in the first half of the year comes from the improvement of profitability: 1) the company's overall gross profit margin has increased to 51.16%, which is 0.81 pct% higher than that of the same period last year. 2) the company's net profit rate has greatly improved, raising 2.26pct to 4.9%. It shows that the operating efficiency of the company is constantly improving.

The new project leads to short-term pressure on funds, and the establishment of a fund to accelerate the strategic landing

At the same time, the company began the construction of a number of new projects, including the fifth-generation Ocean Park project and the life-oriented project of tourism products. The project under construction at the end of the period reached 262 million yuan, an increase of 31 million yuan over the beginning of the period, and there was some pressure on funds in the short term. Cash outflow in the first half of the year was 53.6284 million yuan, but in the long run, profits inflow after the completion of the new project, investment decreased, which will increase the company's future income.

In order to speed up the completion of the company's industrial upgrading and strategic layout, and to alleviate the financial pressure: 1) the company's Harbin Phase II project introduced strategic investors (Yosemite and Yuefeng Industries) and increased its capital by 56.133 million yuan. After the capital increase, the company holds 45% of Harbin Shengya Tourism (another 10% is owned by the employee shareholding platform), while Yosemite and Yuefeng hold 35% and 10% respectively. 2) the company announced on August 10, 2018 that it plans to set up a St. Asia Travel Fund, which intends to raise 300 million yuan to invest in high-quality cultural, tourism and logistics enterprises related to the company's main business. It is not only expected to alleviate the financial pressure of the company by means of professional fund operation, but also accelerate the realization of the company's long-term planning.

The quality establishes the brand, the management output project runs well

The company's main ocean theme park is currently in a period of rapid development. From the perspective of supply and demand, China's ocean theme park market still has a market gap of 900 million people. As a listed company, the company has made a first-mover advantage in technology, not only the penguin breeding technology has always maintained the domestic leading level, but also the breeding success rate of spotted seals is a leading level in the industry. At the same time, the company's "Moby Dick Project" has also made good progress, and the collaborative model of "marine culture + compound format" promotes the rapid expansion of the company's business. The company's management output project-- Wuhu Xinhua Union Moby Dick Ocean Park and Huai'an Dragon Palace Moby Dick Water World Project, is in good condition. In the future, it is expected to optimize the company's asset structure through the management output model.

Investment suggestion: we believe that the company is located in the ocean theme park industry demand prospects, the company's technology, management advantages to further enhance the company's IP strength. In the future, the company's fifth-generation Ocean Park project, management export project and tourism product life project are expected to bring greater performance increments for the company.

Profit forecast: it is estimated that the EPS from 2018 to 2020 will be 0.81,1.06,1.24 yuan respectively. At present, the stock price corresponds to 30X, 23x and 20x respectively, covering for the first time and giving "overweight" rating.

Risk hint: the project is not advancing as expected; the company is short of funds; macroeconomic risks.