Performance growth is in line with expectations, collectivized management and control to improve efficiency

The company's 2017H1 realized net profit of 460 million yuan, + 14% year-on-year; revenue of 690 million yuan, + 19% year-on-year; non-annualized EPS 0.44 yuan, year-on-year + 14%; non-annualized ROE 9.2%, year-on-year + 0.74pct. The company established a new Dongguan-Shenzhen Expressway Branch in the first half of 2017 to be responsible for the operation and management of expressways, implement the organizational structure of collectivized management and control, promote the coordinated development of expressway operation, financial leasing and commercial factoring, and improve the overall operational efficiency of the company.

Road and bridge tolls remain stable and contribute to sustained and stable cash flow

Driven by regional economic development and the growth of car ownership, the highway section operated by the company 2017H1 achieved a total of 40.73 million toll vehicles, an increase of 12% over the same period last year; toll revenue of 520 million yuan, an increase of 9% over the same period last year; and a gross profit margin of 71%, an increase of 0.92pct over the same period last year. The steadily growing cash flow provides sufficient capital support for the company's transformation to the financial investment field.

Lease factoring promotes integration, and profit growth points stand out.

At present, the company has formed an integrated financial product service pattern of financial leasing and commercial factoring, which not only realizes resource sharing, cross-marketing and coordinated development in customer resources and risk management, but also enhances the company's comprehensive financial service capability by providing diversified forms of financial products. In the first half of 2017, Rongtong Leasing and Hongtong factoring contributed a total profit of 54.33 million yuan, an increase of 26% over the same period last year. Among them, Rentong Leasing 2017H1 achieved a net profit of 29.7 million yuan, with a slight decline in performance; since its operation, Hongtong factoring has focused on expanding new business around education, medical care and engineering factoring, gradually creating its own unique products and services. Hongtong factoring achieved business income of 79.78 million yuan and net profit of 24.12 million yuan in the first half of the year, becoming a new profit growth point of the company.

The market has warmed up and the performance of the participating companies has improved.

The investment income of the company 2017H1 in joint ventures and joint ventures was 110 million yuan, an increase of 14% over the same period last year. Among them, Humen Bridge Company 2017H1 reached 520 million yuan, an increase of 11% over the same period last year; driven by the recovery of the capital market, Dongguan Securities 2017H1 achieved a net profit of 390 million yuan, an increase of 14% over the same period last year. Affected by Jinlong shares related matters, Dongguan Securities suspended IPO, the future restart of IPO is expected to be strong, optimistic about the long-term development space.

The fixed increase expectation is strong, the shareholder resource advantage, maintains the "increase" rating

The company's non-public offering plan has been approved by the CSRC, pending formal approval, and is optimistic about boosting the performance of the leasing business after the fixed increase is in place. At the same time, as the only state-controlled listed company in Dongguan, the controlling shareholder has large-scale investment and rich experience in many business areas, and the company will have the capital and policy advantages of extension development in the future. From 2017 to 2019, the EPS is expected to be 0.78,0.87 and 0.99 yuan respectively, using the segment valuation method, the target price range is 15-17 yuan per share, maintaining the "overweight" rating.

Risk hint: the fixed growth process is not as expected, the national reform process is not as expected, and the risk of market volatility.