Recently, we conducted research on Oriental gardens. According to research, the company's debt crisis and liquidity crisis have basically been eliminated, the company's ongoing projects have been sorted out effectively, and historical business risks have been better released. The company's operations in the third quarter of this year have shown obvious marginal improvements; with Chaoyang's state-owned investment in Oriental Garden and the smooth implementation of board elections at the end of October, the synergy between Chaoyang State-owned and Oriental Garden in terms of financing, business, resources, etc. will gradually become apparent; Further cooperation between the two sides will help the company continue to eliminate historical management risks, promote the smooth execution of ongoing engineering projects, and quickly resume hazardous waste business operations. The driving force for future continuous development has increased; the company's operating conditions and financial conditions in the fourth quarter can be expected to improve markedly, showing an inflection point in performance. Research summary: 1. Sorting out ongoing projects and eliminating historical business risks Sources of ongoing project risks There are two main risks that may exist in historical projects: First, if some projects are not completed, will the government investigate liability for breach of contract. There are many reasons why the project was not completed, changes in the objective circumstances of the parties not responsible, such as the financing environment and policies, etc., and the wishes of the local government. Judging from the current suspension situation, it was basically all resolved through negotiation, and the shutdown and transition was carried out according to the current status of the project. Moreover, when such projects were terminated, there were no direct financial losses on the part of the owners, and the financial liability caused by the default was limited. The second risk is whether the output value of the executed project can recover costs and bring benefits in the future, that is, the recovery of accounts receivable. Status of ongoing projects: After deducting some of the earlier projects that were not actually implemented, the remaining 112 projects are divided into the following categories: 1. More than 30 loans have been implemented; 2. There are more than 10 loan execution speed and high implementation rate; 3. There are nearly ten repurchase projects. For this type of project, both the company and the government have paid the registered capital in equal proportions. Originally, there was a lot of hope that the loan would not be successful, but due to various reasons such as inventory clearance, inventory adjustment, and public opinion, etc., the company felt that the risk of repayment from the project and the government was controllable, so most of the projects have been advanced. Currently, most of the projects can be completed with very little capital and enter the repurchase payment period. In addition to local governments paying every year according to contracts, when these projects enter the operation period, they can also be used as ABS or bank financing revitalization projects to quickly return funds; 4. Shut down and transfer more than 20 projects. Capital investment in these projects is limited. Basically, agreements or intentions have been reached with local governments, and they have been shut down through settlement of the current status of the project, installment payments, transfer of shares in the project company, etc. The repayment rate for this type of project is basically 6-3-1, and the initial repayment for individual poor conditions is 40% to 50%. Since the project was shut down midway, it had a certain impact on the gross margin of the project, but the impact was limited because the confirmed output value was not significant. 5. The remaining 30 or more projects are classified as negotiable projects. If a loan is granted, execution can be continued; if the loan is difficult or progress is slow, it will either be closed or transferred or introduced to a partner. They are not classified as category 2, mainly because loans are progressing more slowly than category 2. Of course, the above project data is dynamic and will be continuously adjusted according to the specific situation of the project. These stock projects are all warehoused compliance projects, and there is a certain scarcity. Currently, some enterprises, including central enterprises or local state-owned enterprises for the project, are negotiating with the company for project cooperation development or equity transfer. Since the company has invested some capital in the early stages, and the shutdown and transfer project has already been processed according to EPC, there is not much capital that will need to be invested in the future. It is estimated that more than 3 billion dollars will be invested, and the corresponding effective engineering leverage can reach around 1:6.5 or even higher. According to a conservative forecast, the stock project still has an effective project volume of more than 20 billion dollars, which is the basis for stock performance over the next 2 years. The repurchase risk of projects entering the repurchase period and the company's accounts receivable risk are viewed by combining accounts receivable and inventory. Engineering inventory and accounts receivable are about 22 billion, divided into 4 categories. The first category is EPC or EPC, with a total of about 14 billion dollars, of which pure EPC is about 10 billion, class EPC is about 4 billion; the second category is about 4 billion PPP projects with sufficient financing; the third category is projects with a high rate of loan settlement or a high probability of landing, about 2 billion dollars; the remaining ones are all negotiable projects, that is, financing is in place or will continue to be implemented, or turn or Cooperation, about 2 billion dollars.Repayments for EPC and EPC-like projects have nothing to do with financing. Last year, when the company had financial difficulties, this aspect of repayment was relatively good; this year it was worse than last year before the state-owned capital was not invested. Subsequent companies, on the one hand, have mobilized resources from various parties through good incentive policies, and on the other hand, they will also seize the policy advantages of increasing the government's efforts to clear arrears over the past two years to expedite repayment. In short, inventory and receivables are also the company's assets from another perspective. Currently, the overall risk is not significant. 2. Daily operations resumed rapidly. Expenses are expected to continue to decline. The company achieved revenue of 3.84 billion yuan in the first three quarters, a year-on-year decrease of 60.2%; net profit of 890 million yuan, a decrease of 190.8%; net profit after deduction of 870 million yuan, a decrease of 190.3%. Losses were drastically reduced in the third quarter, revenue recovered, and expenses fell. The company's net profit for the third quarter was 8.51 million yuan and net profit after deducting non-return net profit was 8.51 million yuan and -145 million yuan, respectively, and the second quarter was -625 million yuan and -450 million yuan. The company's losses in the third quarter shrank sharply, and operations improved. The sharp reduction in the company's losses in the third quarter was mainly related to the rapid recovery of the company's revenue and lower expenses. The company achieved revenue of 1,645 million dollars in the third quarter, a sharp increase of 39.8% over the second quarter. It is expected to be related to an increase in the number of projects started by the company and improvements in project progress; the sum of the company's three expenses in the third quarter was 497 million yuan, down 26% from the previous month, the cost rate was 30.2%, down 26.7 pct from the previous month, the cost control was effective, and the marginal improvement was significant, effectively reducing the erosion of expenses on profit. The financial expenses rate was 164 million yuan, down 44% from the previous quarter. The financial expenses rate was 10.0%, down 15.1pct from month to month, which contributed greatly. The company's high management expense ratio since 18 years is related to the company's large business expansion in 2017 and the large number of business personnel, and it is expected that it will continue to decline in the future; in the future, as the synergy between Oriental Garden and Chaoyang's state-owned assets gradually deepens, the liquidity support received will continue to increase, and it is expected that it will continue to decline. In terms of cash flow, the company received 3.162 billion yuan in cash from sales products and services in the first three quarters, an increase of 9.5% over the previous year, which is expected to be related to the company's focus on repayment and good results; the company's net investment cash flow for the first three quarters was -124 million yuan, a sharp decrease from the same period last year to 3.51 billion yuan. Overall, the company's cash flow improved significantly over the same period last year, focusing on management risk control. The company's third quarterly report revealed the forecast for 2019 business performance. The company expects net profit from the mother in 2019 to be -350 million to 100 million yuan, that is, the company's fourth quarter performance is expected to be 5.4 to 990 million yuan, and the company's daily operations are expected to resume normal operations in the fourth quarter. The company continues to absorb existing projects. Currently, the resumption of work on projects is progressing well, and future revenue recovery is strongly supported. 3. With the equity transfer on September 30 and the board of directors restructuring completed on October 28, the actual controller of the company changed, and Chaoyang's state-owned investment brought the following major changes to Oriental Garden: 1. Liquidity support: The three quarterly reports and other announcements can be seen: (1) increased credit; (2) broadened financing channels; (3) reduced financing costs; (4) structural changes, the share of short-term debt declined, and the share of long-term debt increased; 2. Project support: Chaoyang District is a strong economic zone in Beijing, and Beijing is at the forefront of its position in economic indicators. The extent to which China attaches importance to greening and the environment It is very large, and is very compatible with Oriental Gardens, including (1) existing parks may require upgrading and renovation and new park construction; (2) there are many opportunities for river management; 3. Resource and asset support: Chaoyang District invests a lot in ecology and environmental protection. The Circular Economy Industrial Park is a national demonstration park. Ecological and environmental protection, sewage assets, etc. are in good harmony with Oriental garden business. 4. The environmental protection sector of hazardous waste business companies currently mainly focuses on hazardous waste business, as well as a circular economy. The hazardous waste business is an important future direction for Oriental Garden. The company started early in the hazardous waste field and achieved rapid expansion through low-cost mergers and acquisitions (projects that require technical reform or not fully mature). At the time, the company made decisions to cultivate the sector, acquired 14 plants with more than 2 million tons of EIA approval, and took dozens of road blocks. After the crisis broke out in 2018, the company sold several hazardous waste plants one after another. Some had high premiums, and some were disposed of quickly and at low prices in order to cope with the crisis. In the future, the company plans to buy back some of the sold projects, and at the same time reorganize the rich project resources in hand, rank them according to the current market environment and the company's capital situation, and favor more resources for high-quality projects. Some of the company's ongoing projects were affected by the 18-year crisis and have experienced operational difficulties. At this point, the company has the ability to rapidly advance and guarantee the technical improvement and normal operation of the original plan of the hazardous waste projects in hand. 　　5. Future layout The future development direction of the company is to focus on the ecological and environmental protection industry, and vigorously develop the circular economy. Through ecological refinement, environmental protection strengthening, circular economy improvement, and rapid restoration of the company's market position. Ecologically, there is a lot of cooperation with the government; the government is the payer. Maintaining an output value of 120 billion dollars per year in the ecological sector engineering business is enough. Focusing on quality projects and focusing on the quality of output value will be a process of getting rid of the benefits. In terms of ecology, the PPP and EPC models have a more balanced ratio, and there is no need to advance a lot of capital. The company's future development space is mainly environmental protection. In terms of environmental protection, it should be strengthened based on technology, mainly industrial hazardous waste disposal, continue to accelerate the construction of industrial hazardous waste disposal production capacity, and at the same time introduce new technology to develop urban solid waste to contribute to the construction of a waste-free city. In the next step, Oriental Garden will also focus on circular economy development, utilize the core technology it has mastered, carry out circular transformation of industrial parks, intelligently upgrade circular economy industrial parks, and provide value-added services. Environmental protection will cooperate more with enterprises in the future. Owners are mainly enterprises, and the cash flow in this area will be relatively stable in the future. Regarding future performance prospects, the company hopes to return to the profit level of two years ago in two years. At the same time, as the company further organizes ongoing projects and the rapid recovery and growth of the hazardous waste business, long-term operations and performance are also expected to continue to improve. 6. Summary: At present, the company's debt crisis and liquidity crisis have basically been eliminated, the company's ongoing projects have been sorted out effectively, and historical business risks have been better released. The company's operations in the third quarter of this year have shown obvious marginal improvements; with Chaoyang's investment in Oriental Garden and the smooth implementation of board elections at the end of October, the synergy between Chaoyang State-owned and Oriental Garden in terms of financing, business, resources, etc. will gradually become apparent; Further cooperation between the two sides will help the company continue to eliminate historical management risks, promote the smooth execution of ongoing engineering projects, and quickly resume hazardous waste business operations The driving force for the company's future continued development has increased; the company's operating conditions and financial conditions in the fourth quarter can be expected to improve markedly, showing an inflection point in performance. 7. Risk warning: 1. Risk of project progress falling short of expectations, causing performance to fall short of expectations; 2. Risk of new projects falling short of expectations; 3. Risk of a sharp increase in financial cost rates due to continued increases in interest rates; 4. Systemic risk of a large market system.