Results for the 3rd quarter of 2019 fell short of our expectations Oriental Garden announced results for the 3rd quarter of 2019: the first three quarters achieved operating income of 3,836 million yuan, a year-on-year decrease of 60.2%; net loss of 886 million yuan (profit for the same period last year was 975 million yuan); of these, the third quarter achieved revenue of 1,645 million yuan, a year-on-year decrease of 48.4%; realized net profit of 8.51 million yuan, a year-on-year decrease of 97.3%; as the decline in revenue exceeded expectations, the company's performance fell below our expectations. 3Q19 The company's revenue decreased by 48.4% year on year, and the decline narrowed as the base figure declined; gross margin decreased 7.3ppt to 26.5% year on year; the total period expense ratio increased 6.2 ppt year on year, of which the management/finance expense ratio increased 5.3/3.4ppt year on year, and the R&D expense rate decreased by 2.5 ppt; total asset and credit impairment losses increased 384% year on year to 75.48 million yuan; investment income increased 384% year on year to 75.48 million yuan; investment income increased from 4.77 million yuan in the same period last year to 120 million yuan; the company achieved a net profit rate of 0.5% in the third quarter, a year-on-year decline 9.2ppt, but after a net loss in 1Q19-2Q19, it turned a loss into a profit in a single quarter, and profit improved marginally. 3Q had a net operating cash outflow of 630 million yuan, an increase of 64% over the previous year. We believe it was mainly due to the fact that project execution and repayment progress was still slow; the net investment cash outflow was 388 million yuan, a decrease of 51% over the previous year. The development trend adjusts the underwriting business model and controls the scale of project investment. On September 18, the company announced that it won the bid for the 450 million yuan Jiangdong Avenue (Phase II) Ecological Corridor construction project. The project adopted an engineering construction model rather than an EPC model, reflecting that the company is controlling the scale of investment by changing the business underwriting model. We expect the company's cash flow to gradually improve in the future. Continued attention to the cash flow situation is recommended. Referring to the three-quarter reports of other listed garden companies, Bishuiyuan and Lingnan shares all showed year-on-year improvements in operating cash flow, reflecting a marginal recovery in garden companies' operations as the market financing environment picked up. It is recommended to continue to pay attention to the company's cash flow situation. Profit Forecast and Valuation We maintain the 2019/2020 net profit forecast of 0.8 to 900 million yuan unchanged. The current stock price corresponds to a price-earnings ratio of 15.0 times in 2020. Maintaining an outperforming industry rating and target price of 5.74 yuan, corresponding to 17.0 times the 2020 price-earnings ratio, there is room for 14% increase from the current stock price. Risk financing and operational improvements fell short of expectations.