Incident On March 28, 2019, the company released its 2018 annual report. It achieved annual operating income of 1,997 billion yuan, a year-on-year decrease of 1.99%, net profit of 94.98556 million yuan, a year-on-year decrease of 14.3%, and net profit of 57.3068 million yuan, a year-on-year increase of 32.99%. The overall revenue was stable, and net profit from non-return was greatly increased. Gross margin increased. The company achieved revenue of 1,997 billion yuan in 2018, a year-on-year decrease of 1.99%, net profit of 94.98556 million yuan, a year-on-year decrease of 14.3%, and net profit of 57.3068 million yuan, a year-on-year increase of 32.99%. The company's net profit after deducting non-return to the parent company increased significantly, mainly due to the non-recurring profit and loss amount of 376.788 million yuan in 2018, a year-on-year decrease of 44.4%, mainly due to the fact that in 2018 non-current asset disposal profit and loss fell about 79% year on year. In 2017, the company generated more asset disposal income due to the expropriation of housing and land in the production and living area of Yichang City to generate more asset disposal income; in terms of the period expenses, the sales expenses ratio was 2.06%, down 0.25pct year on year, mainly due to 4S store demolition expenses incurred in 2017. The management expense ratio was 5.66%, an increase of 0.59pct over the previous year, mainly due to the costs incurred by newly established subsidiaries in this period, including Linhong Auto Sales & Service Co., Ltd. and Jiaotong Songzi. The financial expense ratio was 1.11%, up 0.09pct from the previous year, and the overall expense ratio for the period was under pressure. The overall gross profit margin in 2018 was 13.22%, up 1.71 pct from the previous year, and the overall gross margin level improved markedly. The sharp decline in net operating cash flow in 2018 was mainly due to the promotion of first-level land development business at the Three Gorges Cruise Center, a subsidiary in the current period. Land demolition fees and other operating expenses were paid more, bringing about normal changes in the new business. The main business is operating steadily. Looking at the rapid growth of travel services by business, automobile sales and after-sales service are still the businesses that account for the largest share of revenue, accounting for about 57% of total revenue. In 2018, revenue fell 2.47% year on year, and gross margin increased 0.36pct year on year. Passenger transportation business revenue was 345 million yuan, up 0.41% year on year, and gross profit margin was 13.69%, down 3.47% year on year. The tourism service business ushered in rapid growth. In 2018, it achieved revenue of 189 million yuan, an increase of 22.84% over the previous year, and a sharp increase in gross margin of 6.28 pct. Among them, the revenue growth rate of the tourist port and waterway tourism business was over 40%. The company added first-level land development business in the current phase, achieving revenue of 8.814 million yuan; in 2018, the main business revenue fell 2.48% year-on-year, mainly due to a decrease in the supply chain management business revenue of the subsidiary Tianyuan Logistics Company. During the reporting period, the company's comprehensive tourism services gave full play to the collaborative advantages of “vehicles, boats, ports, stations, and communities” resources. The number of visitors received achieved a breakthrough increase, actively grasped the adjustment of the three-gorge five-level lock policy for cruise ships, and established a dispatch and command center for land, water, and ships. Comprehensive development of tourist passenger transportation, “two dams and one gorge”, “Yangtze River night tour”, travel agencies, and ports in waterway tourism. Issuing shares to buy assets to improve the tourism layout. Multi-business innovation brings room for growth. On February 1 of this year, the company issued an announcement to issue shares to purchase assets and increase capital raising. It plans to issue a total of 12.624 million shares to Yichang Daoxing Cultural Tourism Development Co., Ltd. and Pei Daobing to purchase 100% of their shares in Jiufeng Valley. Daoxing Cultural Tourism and Pei Daobing promised that Jiufeng Valley will not be less than 8 million yuan, 9 million yuan, and 11 million yuan in non-net profit in 2019-2021. The Three Gorges Jiufeng Valley Scenic Area is a key tourism project in Yidu. In 2016-2018, the number of visitors received increased from 78,600 to 249,800, and achieved profit of 7.279 million yuan in 2018, compared to 17 to 5.991 million yuan, turning a loss into a profit, with good growth; in 2018, on the basis of continuing to do a good job in transportation business, the company will vigorously promote and drive the development of tourism and related emerging business projects to achieve the transformation of traditional industries. At the same time, after the automobile sales market gradually entered the stock stage, it accelerated its transformation and adjustment to the automotive aftermarket, and continued to adapt to changes such as new energy driving and autonomous driving. The logistics business will also gradually develop in the direction of supply chain management. In 2019, the company plans to achieve revenue of 2,026 billion yuan and net profit of 101 million yuan. The company expects net profit of 16.4019 million yuan to 207.757 million yuan in the first quarter of 2019, an increase of 50% to 90% over the previous year, and a significant increase in profitability. Investment suggestions: It is expected that the company's main business will develop more steadily in the next two years, the automobile sales service and transportation business will continue to innovate steadily, and focus on the development of tourism business and logistics business, so there is room for growth. The EPS for 2019-2021 is expected to be 0.37, 0.44, and 0.48 yuan respectively. The current stock prices corresponding to PE are 22X, 19X, and 17X respectively, covering the “increased holdings” rating for the first time. Risk warning: road passenger transport and tourism service traffic safety risk; transportation market downside risk; Yangtze River Delta tourism service enterprise competition risk; subsidiary enterprise management integration risk.