The performance of 18H1 increased by 100.5% over the same period last year, and the project contracting business grew rapidly.

The company's 18H1 realized operating income of 2.828 billion yuan, an increase of 32.95% over the same period last year, mainly due to the rapid growth of project contracting and design business; the net profit of 148 million yuan, an increase of 100.5% over the same period last year, mainly due to an increase in operating income and investment income. From a business point of view, the company's business income from engineering design / project contracting / engineering technical consultation and management and investigation was 1.67 billion yuan respectively, an increase of 29.8% over the same period last year, with a year-on-year increase of 46.2% and 12.7%, respectively. The business of project contracting and design grew rapidly. From a sub-regional point of view, the company's operating income in Shanghai local / non-local / overseas achieved 1.85 billion, respectively, an increase of 20.4%, 50.6% and 42.2%, respectively, over the same period last year. The company achieved significant revenue growth in Shanghai and overseas. The company's 18H1 gross profit margin is 23.5%, down 1.5pct from the same period last year, due to the rapid growth of the project contracting business with lower gross profit margin, which accounts for an increased share of income; the net profit rate is 5.9%, an increase of 1.7pct over the same period last year, due to an increase of 42 million in investment income. The company's expense rate during the 18H1 period was 17.4%, which was lower than that of the same period last year. Among them, the sales / management / financial expense rate is 1.0%, 16.4%, 0.0%, respectively, and the year-on-year change is-0.2/-1.5/+0.2pct. The net operating cash flow of the company's 18H1 was 490 million yuan, an increase of 100 million yuan over the same period last year; and the investment cash flow was 72 million yuan, an increase of 200 million yuan over the same period last year, mainly due to the company's acquisition of 51% equity interest in Wuhan Zhenghua and 34% equity in Jiangzi Group in the same period last year. The cash-to-cash ratio / cash-to-cash ratio of 18H1 is 87.2% and 60.6% respectively, which is 2.9% lower than that at the end of 17. By the end of the first half of 18 years, the company's asset-liability ratio was 64.1%, lower than at the end of 17 years.

The total contract increased by 96.6%, actively opening up the "Belt and Road Initiative" market.

18H1 signed a new contract of 5.59 billion yuan, an increase of 39.8% over the same period last year. Of this total, the design consulting contract was 3.22 billion yuan, an increase of 15.2% over the same period last year; and the general contract was 2.37 billion yuan, an increase of 96.6% over the same period last year. With its excellent design capability, the company will undertake more general contract orders to ensure future performance growth. The company actively develops overseas markets and expands the "Belt and Road Initiative" market focusing on Vietnam and the Philippines. In the first half of the year, the company signed 17 overseas projects such as Vietnam, Philippines and North Africa, and actively approached potential projects such as Princess Port of Malaysia, Manila City Renewal of the Philippines and Indonesia's new airport. Continue to participate in the bidding for foreign aid projects of the Ministry of Commerce, and win bids for influential foreign aid projects in Myanmar, Samoa, Tunisia and other countries, creating an opportunity for the company's key regional design specialization and full-process engineering consulting business in overseas markets.

Actively expand non-local business, and the controlling shareholder has strong financial strength.

The actual control of the company is Shanghai SASAC, which has strong financing ability. In the first half of the year, the company strengthened the construction of regional centers and mainland branches, expanded its foreign business, unveiled the establishment of Xiongan Design Institute, and participated in the control planning of Xiongdong area and the urban design of Xiongan high-speed railway area. participated in Zhengdong New District Longhu Financial Center project, Guangdong-Hong Kong-Macau Greater Bay Area and financial island planning and design projects, non-local business development is smooth. At the same time, the company has set up a South China Center to accelerate its entry into foreign markets. In addition, in the first half of this year, the company plans to invest 100 million yuan to set up a cooperation fund to transfer 28% of the shares held by the controlling shareholders in Wuxi Municipal people's Court in cash to horizontally invest in expanding business and lay the foundation for the future development of the company.

Profit Forecast and Investment rating

The basic assumptions of the company's profit forecast are as follows: (1) operating income: the company's newly signed 18H1 order is 5.589 billion yuan, an increase of 39.8% over the same period last year. The company's engineering general contracting business has grown rapidly in recent years, which is expected to lead to a sustained growth of total income. (2) Gross profit margin: we expect the gross profit margin to be stable as a whole. With the increase of EPC business, the company will have more engineering management experience to stabilize the comprehensive gross profit margin at about 23%. (3) period expense rate: the expense rate during the 18H1 period of the company is 17.4%, which is lower than that of the same period last year. With the construction of the company's regional center and mainland branches, the management will be more efficient, and the economies of scale effect will be further strengthened. During the period, the expense rate will be maintained at 17% and 18%. Vertically, the company's transformation from the design to the general contract is smooth; horizontally, the company actively expands its non-local business and actively participates in the "Belt and Road Initiative" market. The overall order growth rate is relatively fast, which provides a guarantee for the company's future development. Infrastructure investment is expected to bottom out and pick up in the second half of the year, and the company as a design leader will benefit significantly. We are optimistic about the future development potential of the company. It is estimated that the return net profit of the company in 18-20 years is 3.56,4.42 and 537 million yuan respectively, corresponding to 0.82,1.02,1.24 yuan per share in 18-20 years, and 16 times PE in 18 years. The valuation is at the bottom of history, and the "buy" rating is given for the first time.

Risk hints: the progress of M & An is not as expected, the expansion of Belt and Road Initiative is not as expected, the speed of order conversion is lower than expected, the growth rate of newly signed orders is declining, the bad debt rate of accounts receivable is increasing, the risk of rising labor costs, and so on.