The company recently announced its results for the first half of 2019, KuaiBao, with operating income of 155 million yuan in the reporting period, down-3.36 percent from the same period last year, and net profit of 13.59 million yuan, up 15.97 percent over the same period last year. The comments are as follows:

Revenue rebounded quarter by quarter, with an upward trend at the operational level

Although the company's operating income fell 3.36% in the first half of the year compared with the same period last year, it has rebounded in a single quarter. The orders signed in the second half of last year have entered the implementation stage one after another, with a quarterly growth rate of-27.70% in the first quarter and 7.01% in the second quarter. Benefiting from the increase in items and the partial reversal of asset impairment losses due to the company's high gross profit margin, the company's non-return net profit increased by 15.97% over last year, although it was lower than in the first quarter (due to the small profit base and large fluctuations in the first quarter). We still believe that the company's business continues to improve, with an upward trend at the operational level. Due to the deterioration of the operating environment last year, the company made more impairment losses at the end of the year, the environment is gradually improving this year, no more is expected, and there is still room for growth in the next two quarters. In addition, compared with other garden companies in the sub-industry, the company's performance has been very excellent, the asset-liability ratio is also at a low level in the industry, and there is still room for balance sheet expansion.

Expo China Pavilion kaleidoscope greenhouse will bring good advertising effect to the company.

The company implements the differentiation development strategy, takes the characteristic advantage development road, forms the technical barrier with the core technology and construction ability accumulated in the greenhouse landscape construction, and occupies the market segment. The company has undertaken the greenhouse landscape project of the Beijing Expo kaleidoscope project and the third section of the first phase of the public greening project of the World Horticultural Expo Park, that is, the greenhouse construction of the key venue China Pavilion. There are 1000 kinds of precious plants in the greenhouse landscape, and the number of visitors to the park has exceeded 2 million in one and a half months as of the Dragon Boat Festival holiday. The company's kaleidoscope project is expected to bring positive advertising effect to the company and bring some convenience for new orders in the future.

Private enterprises have introduced strategic investors in the current economic situation.

According to the statistics we made in the report "Industry semi-annual Investment Strategy: the probability of Policy backing up and the layout of Infrastructure chain at the right time", 13 companies in the construction industry have transferred part of their shares during the year. Among them, the garden industry is more common, and 6 garden companies have transferred their shares. As deleveraging continues, these private enterprises transfer some of their shares to state-owned enterprises or state-owned platforms to obtain financing support. Under the background of the introduction of war investment by garden industry companies, there is also some room for imagination in the current fixed increase plan of the company.

Investment suggestion

The results announced by the company KuaiBao are basically in line with our expectations, and the current business income has rebounded quarter by quarter; the ongoing Expo has also brought a good advertising effect to the company. In short, the company's performance trend has been confirmed, and business is expected to continue to improve in the future. We maintain the forecast of EPS of 0.20,0.24,0.30 yuan per share from 2019 to 2021, corresponding to 24,20,16 times PE, and maintain the "overweight" rating of the company and the target price of 6.40 yuan.

Risk tips: accelerated decline in the growth rate of fixed asset investment, intensified inter-industry competition, industry payback risk, project promotion is not as expected