The incident company released its 2018 annual report, achieving revenue of 468 million yuan, a year-on-year decrease of 14.78%; realized net profit of 26.4039 million yuan, a year-on-year decrease of 60.80%; and net profit after deducting net profit of 21.1793 million yuan, an increase of 4,142.02% over the previous year. Brief review The operation was stable throughout the year, and the number of visitors received continued to increase. In 2018, the company received a total of 5.964,900 visitors, an increase of 0.25% over the previous year. In the company's business, the Baofeng Lake and Shili Gallery sightseeing tram businesses are the main drivers of passenger flow growth. Passenger traffic increased by 12.72% and 8.29% respectively. In particular, under the influence of the construction of Wulingshan Avenue in 2018, the company also guaranteed a year-on-year increase in passenger flow, indicating that the company's operating fundamentals are relatively good. The company's revenue mainly comes from the environmentally friendly passenger transport business and travel agency business. Eco-friendly passenger transport contributed 170 million yuan, accounting for 36.34%; the travel agency business brought in 141 million yuan in revenue, accounting for 30.13%. Revenue continued to grow in the Baofeng Lake and Shili Gallery sightseeing tram businesses, which achieved revenue of 6,748.5 (+15.36%) and 5011.53 (+3.01%) million yuan, respectively, accounting for 14.03% and 10.7%, respectively. The relatively small ropeway and hotel businesses achieved revenue of 35.31.45 million yuan and 15.471 million yuan respectively, accounting for 7.54% and 3.30%, respectively. Strictly controlling costs and reducing expenses, achieving a significant increase in non-net profit, the company's net profit after deduction reached 21.1793 million yuan, a growth rate of 4,142.02%, mainly due to the large volume of non-recurring profit and loss in 2017. At the same time, the company made significant progress in reducing current costs in 2018:1) gross margin increased by 0.49pct to 31.52%; 2) Under cost control, sales and management expenses decreased by 28.56% and 18.38% respectively. Sales and management fees decreased by 0.93pct and 0.76pct respectively compared to the same period last year. At the same time, through interest capitalization and other methods, the company's financial expenses fell 76.35%, and the financial rate also fell by 2.3 pct. The construction of Dayong Ancient City is going smoothly. Traffic improvements in the Zhangjiajie Scenic Area are imminent, and the Dayong Ancient City project that the company is focusing on is the key to business transformation. It will be built as a cultural tourism complex, integrating food, drink, play, shopping and entertainment. Judging from business attributes, Dayong Ancient City is the company's brave attempt to transform from traditional sightseeing tours to leisure and vacation tours. It is estimated that after mature operations, annual revenue will reach 425 million yuan and net profit will reach 185 million yuan. After completion of the project, it will inject momentum into the company's long-term development. At present, the progress of the project has reached 93.50%, the main construction of the ancient city of Dayong has been basically completed, and the two major core service projects, the large-scale folk performance “Meet the Dragon” and the Flying Cinema, have basically been completed. According to the latest plan, the Dayong Ancient City project is expected to commence operations in October this year. The future growth space of the Zhangjiajie Scenic Area will benefit from improved transportation, especially in terms of railway construction: 1) the opening of the Qianzhangchang Express Railway this year; 2) In 2021, the Zhangjihuai high-speed railway is expected to be put into use, opening up the Zhangjiajie and Fenghuang scenic areas; 3) the Jingzhang high-speed railway is already under construction. Meanwhile, the entire Wulingshan Avenue line has been completed and opened to traffic this year, and the level of passenger flow is expected to increase further. Investment suggestions: We believe that in the future, the company's internal+extension is expected to bear fruit, and the level of revenue and passenger flow is expected to increase; at the same time, after the implementation of the company's Dayong Ancient City project, it will open up room for long-term growth for the company. It is estimated that the EPS for 2019-2021 will be 0.07, 0.08, and 0.1 yuan, respectively, and the stock price corresponding to PE will be 92, 78, and 65 times, respectively, maintaining the “increase in holdings” rating. Risk warning: passenger flow in the ancient city of Dayong falls short of expectations; uncertainty caused by weather factors; geopolitical risks.