Events:

On the evening of July 12, the company issued a semi-annual performance forecast for 2019: in the first half of the year, the company realized a net profit of 33.0766 million yuan belonging to shareholders of listed companies, an increase of 30-35% over the same period last year. In this regard, our comments are as follows:

Main points of investment:

The increase in net profit is 30-35% in line with expectations, and the order-on-hand order is sufficient, high performance, high growth and sustainable.

In the first half of the year, the company realized a net profit of 3185.16 million yuan belonging to shareholders of listed companies, an increase of 30-35% over the same period last year, in line with market expectations. The reason for the increase in performance is that the company rammed the design business steadily and made continuous breakthroughs in expanding EPC business. in the first half of 2019, the company successively won the general contract project of tourism infrastructure supporting project of Liangzhu ruins Park (217 million yuan), the environmental improvement project of Shilongshan South Block and the EPC general contract project of Lingshan Road upgrading project (181 million yuan). At present, the contract project is more than 700 million yuan. It is 133% of the company's revenue in 2018, with sufficient orders-on-hand, high performance and sustainable growth.

From design to EPC, the logic of growth continues to be realized.

The company has double Grade A qualification for landscape architecture and construction design. with the West Lake Comprehensive Protection Project, Xixi National Wetland Park, "G20 Hangzhou Summit", "Xiamen BRICS leaders meeting" core landscape design and other works to create a good brand image, is a leading enterprise in the landscape design industry. While consolidating the design business, the company gives full play to the design business to grasp the overall entrance advantages of the project, and actively expand to the downstream EPC, engineering and other business, with obvious advantages (the design business generally accounts for only about 3-5% of the total contracting scale of the project, and the expansion of EPC business can greatly improve the revenue level and open up new growth space). The gross profit share of the company's EPC business increased from 11.75% in 2017 to 40.37% in 2018. The growth logic continues to materialize.

Profit forecast and investment rating: maintain the company's "overweight" rating. We are optimistic about the company's brand advantages and the growth space brought by the expansion of EPC business. It is estimated that the company's 2019-2021 EPS will be 0.77,0.98,1.14 yuan respectively, and the previous share price PE will be 27,21,18 times, maintaining the company's "overweight" rating.

Risk hints: the risk that the project expansion is less than expected, the risk of a substantial increase in accounts receivable, the uncertainty risk of expanding into the engineering field, the upward risk of interest rate, the lower-than-expected risk of contract execution and the downside risk of macro-economy.