The company recently released its 2017 semi-annual report. In the first half of the year, the company achieved operating income of 3.74 billion yuan, an increase of 4.56% over the previous year, and net profit of 121 million yuan, an increase of 20.11% over the previous year. The comments are as follows: Orders grew rapidly, boosting PPP results in the first half of '17. In the first half of '17, the company's construction industry won a new bid of 8.029 billion yuan, an increase of 73% over the previous year, and completed 53.5% of the annual plan, including a number of PPP projects such as PPP for comprehensive water system management in the Jinshan area of Fuzhou City, to strengthen PPP business market development results. Under the favorable trend of removing inventory in the domestic real estate market, a new commercial housing sales contract of 1,062 billion yuan was signed, an increase of 6% over the previous year. The three PPP projects have increased investment of 228 million yuan in the current phase. Revenue increased slightly, and business structure gradually improved. In the first half of '17, the company achieved revenue of 3.74 billion yuan, an increase of 4.56% over the previous year. The company has steadily expanded the national market and entered new business fields such as design and construction integration and large shields. In the first half of the year, it achieved revenue from construction and infrastructure investment of 2.93 billion yuan, an increase of 13.92%. The real estate business achieved revenue of 746 million yuan, a decrease of 20.8%, and the overall business structure continued to improve. Excluding the impact of “business reform and growth,” it was calculated that the gross margin for the first half of 2017 was 8.35%, which remained basically stable. The expense ratio for the period declined, and net profit of the company continued to rise. The company's expense ratio for the first half of '17 was 4.88%, down 0.58 percentage points from the previous year. Among them, the sales expense ratio and management expense ratio remained stable, and the financial expense ratio fell 0.77 percentage points year on year, mainly due to a significant reduction in exchange losses and interest expenses. The company withdrew or reverted some bad debt provisions in the current period, causing asset impairment losses to drop sharply by 217.03% year over year to -29.68 million yuan, and net profit increased 0.41 percentage points to 3.22% year on year. Net profit of 121 million yuan was realized in the first half of the year, an increase of 20.11% over the previous year. The company's performance for the first three quarters is expected to maintain steady growth. Net profit is estimated to be between 159 million yuan and 207 million yuan, an increase of 0 to 30% over the previous year. The cash flow situation is relatively good. The non-public offering has received feedback to help the main business expand the revenue ratio for the first half of '17, up 0.12 percentage points from the same period last year, and the payout ratio is 0.76, down 0.11 percentage points from the same period last year. The net cash flow from the company's operating activities in the first half of the year was 501 million yuan, mainly due to the good cash flow in the real estate sales business. Currently, cash flow is relatively abundant, and business conditions are improving. The company's application for a non-public offering to raise 1.2 billion dollars for PPP projects has now received a feedback notice from the Securities Regulatory Commission and disclosed the feedback in response to the announcement. If the capital raised is in place, the company's capital strength will be strengthened. Investment recommendations Currently, the company's new orders are growing rapidly, cash flow is abundant, repayment is good, and PPP projects continue to advance, and profits are expected to increase further. The company's EPS from 2017 to 2019 is expected to be 0.26, 0.31, and 0.36 yuan/share, corresponding to PE 23, 19, and 16 times, maintaining the “increased holdings” rating. Risk warning: fixed asset investment growth continues to decline; PPP projects fall short of expectations