Endogenous epitaxial two-wheel drive, continuous optimization of business structure. At the beginning of the listing, the company was mainly engaged in landscaping business; starting in 2015, the company carried out “secondary entrepreneurship”, vigorously laid out the cultural tourism and water management business sectors through external expansion, and successively acquired companies such as Hengrun Technology, Demaji, and Xingang Yonghao. The company was gorgeously transformed into a comprehensive service provider for the ecological environment, garden construction, and cultural tourism investment and operation. Currently, the company has various qualifications such as water conservancy and hydropower construction general contracting level qualification, national landscape engineering design grade A qualification, municipal public works construction general contracting level 1 qualification, etc., and has built three business segments: ecological gardens, water management and cultural tourism. Among them, water management and cultural tourism business are growing rapidly. In 2018, water management and cultural tourism business revenue increased 280% year on year, and cultural tourism business revenue increased 56% year on year. The company's business structure continues to be optimized, and the share of cultural tourism profits continues to increase. In 2018, the company's ecological gardens, water management and cultural tourism businesses accounted for 49%, 39% and 16% of revenue, respectively, and gross profit accounted for 41%, 32% and 27% respectively. The cultural tourism business contributed significantly to the company's performance. The garden industry ushered in pain and adjusted its development strategy in line with the trend. The biggest “pain point” in the garden industry — advance capital. As a result of capital advances, garden companies' accounts receivable, inventory, and long-term receivables are high, and operating cash flow continues to deteriorate. In order to maintain the company's continued growth, garden companies must meet the needs of development through continuous financing. Since 2017, the state has introduced a series of financial deleveraging policies. The garden industry's growth model based on financing is unsustainable, and the pressure on cash flow is increasing day by day. At the same time, the state has introduced PPP regulation and rectification policies such as “Document No. 50,” “Document No. 87,” and “Document No. 92,” and “Document No. 92,” and irregular PPP projects have been forced out of storage, posing potential risks to the development of the industry. The performance of the garden industry in 2018-2019 was “squatting”. Many companies' performance declined sharply or suffered serious losses, and companies were not “spared”. The company adjusted its development strategy in line with the trend, actively slowed down engineering business progress and order acceptance, and at the same time increased cash flow management, prevented and controlled operating risks and cash flow risks, and at the same time reduced the majority shareholders' pledge ratio and enhanced the resilience of controlling shareholders to risks. Currently, the company's financing environment has improved, and new orders have resumed growth. It is expected that it will take the lead in stopping the decline and stabilizing, leading the industry out of the trough. The cultural tourism business started strong, and the core company performed well. Since 2015, around the established strategy of “secondary entrepreneurship”, the company has successively acquired shares in companies such as Hengrun Technology, Demaghi, and Microcommunication through mergers, acquisitions and restructuring, and has continued to increase the cultural tourism business sector. Hengrun Technology is a leading provider of themed cultural tourism creation services in China, focusing on R&D, design, production and system integration of immersive amusement equipment systems. In 2018, it achieved revenue of 735 million yuan and net profit of 140 million yuan. DMG is a professional operating service provider for global brand creative marketing. It is mainly engaged in global exhibition marketing services, global brand operation activities, and showroom space design and construction. It achieved a net profit of 46 million yuan in 2018. Microcommunication is a high-quality Internet marketing platform dedicated to providing customers with integrated marketing service solutions for social networks and new media. In 2018, it achieved revenue of 402 million yuan and net profit of 108 million yuan. The company's cultural tourism business started strong, and the core company's performance was impressive. In 2018, the company's cultural tourism sector contributed a total revenue of 1,395 million yuan, gross profit of 591 million yuan, and net equity profit of 204 million yuan. The spin-off listing has begun, and the company has met the conditions for spin-off. In March 2019, the Securities Regulatory Commission issued the “Measures for the Continued Supervision of Companies Listed on the Science and Technology Innovation Board (Trial)”, which clearly states that listed companies that have reached a certain scale can be spun off and listed on the Science and Technology Innovation Board in accordance with relevant regulations, independent and eligible subsidiaries. In August 2019, the Securities Regulatory Commission announced a draft for comments on the “Certain Provisions on the Domestic Listing Pilot for the Spin-off of Subsidiaries of Listed Companies”, which for the first time stipulated in detail the definition, threshold, and requirements for spin-off and listing. In December 2019, the Securities Regulatory Commission issued “Certain Provisions on the Domestic Listing Pilot for the Spin-off of Subsidiaries of Listed Companies”. The profit threshold requirement for spin-off and listing was reduced to 600 million yuan. A spin-off listing can be the entire A-share market, and the spin-off listing policy has been implemented. According to the spin-off and listing policy, the listed company to be spun off must have: (1) it has completed 3 years of domestic listing; (2) continuous profit for the last 3 fiscal years, with a cumulative net profit of not less than 600 million yuan; (3) the net profit of the proposed spin-off subsidiary does not exceed 50%, and the net assets do not exceed 30%. The company has basically met the conditions for spin-off and listing, and its subsidiary Hengrun Technology has completed the stock reform. Profit forecast and investment recommendations: The net profit attributable to the company's shareholders in 2019-2021 is expected to be 428 million yuan, 493 million yuan and 591 million yuan respectively, up -45%, 15% and 20% year-on-year respectively; EPS is 0.28 yuan, 0.32 yuan and 0.38 yuan respectively, corresponding to the closing price of February 20, 2020 PE is 20.43 times, 17.76 times and 14.80 times, and PB is 1.6 times, 1.5 times and 1.4 times, respectively. Since “starting a second business”, the company's business structure has continued to be optimized, and the company has transformed from an “urban landscape operator” to a “integrated service provider for ecological gardens, water management and cultural tourism”. Through endogenous growth and external expansion, the company has diversified tasks, enhanced its core competitiveness, and enhanced its ability to withstand risks. With the acceleration of new orders for water management and cultural tourism businesses, the company's performance is expected to bottom out and pick up, leading the garden industry out of its trough. At the same time, the company has the conditions for spin-off and listing, and is expected to share the policy dividends of spin-off and listing. Optimistic about the company's performance bottoming out and the cultural tourism sector's valuation increase, maintaining the company's “buy-A” rating, the target price is 7 yuan, corresponding to about 21.8 times PE in 2020. Risk warning: risks such as PPP policy changes, project progress falling short of expectations, orders falling short of expectations, continued decline in performance, and blocking of spin-offs and listings.