The company released its mid-year report in 2019, with a revenue of 811 million yuan in the first half, a decrease of 23.09%, and a net profit of 123 million yuan, a decrease of 15.11%, and a decrease of 18.18%. The overall decline of the garden industry, the company to improve the quality of revenue, cash-to-cash ratio and gross profit margin have significantly improved.

Support the main points of rating

The gross profit margin has increased significantly, and the rate of R & D expenses has increased: the company's revenue growth has declined due to industry factors. In the first half of the year, the company improved its fine management, the gross profit margin of each business increased, and the average gross profit margin increased 8.68pct compared with the same period last year, which was caused by mine repair and the adjustment of the business structure of the original gold point garden; at the same time, the company increased its research and development efforts, as well as increased financial pressure, and the expense rate increased 6.92pct compared with the same period last year. In the first half of the year, the company's accounts receivable and inventory decreased and the cash recovery rate increased, but the operating cash flow decreased, the debt ratio increased, and capital expenditure also increased.

Adjust the proportion of business, improve revenue quality: since 2018, the company has timely adjusted the proportion of business, controlled the scale of newly signed orders, and improved revenue quality. Increase mine restoration, municipal projects and "wood interest"

Products and other business share, improve the company's gross profit margin and project cash recovery rate. Although revenue growth slowed in the first half of the year, various financial indicators remained at a good level.

Early financing to avoid risks, strategic investment to enhance the potential: at present, the ecological garden industry funds are tight, the performance has declined significantly, the company's early financing to fully avoid industry risks. The recent introduction of Hunan Xiangjiang Group into the company is expected to further expand the business in Hunan and the sales of "wooden fun" products in Hunan, and further improve the company's cash flow.

Valuation

At present, the funding of the garden industry is tight, the performance of the industry company is declining seriously, the company is sound, and the management quality is expected to be improved. As a result, we downgrade our performance forecast, but maintain the company's overweight rating. It is estimated that from 2019 to 2021, the company's revenue will be 20.91,24.37 and 2.752 billion yuan respectively, the net profit will be 4.62,5.68 and 651 million yuan respectively, and the EPS will be 0.684 yuan, 0.842 yuan and 0.966 yuan respectively.

Main risks faced by rating

The effect of business structure adjustment is not good, and the promotion of "wooden interest" products is not as expected.