What happened: the company recently released the 2017 China report that the company's revenue in the first half of the year was 870 million yuan, down 14.72% from the same period last year, the main business profit was 223 million yuan, an increase of 16.07% over the same period last year, and the net profit attributed to the parent company was 34.66 million yuan, down 12.87% from the same period last year. After deducting non-recurrent profit and loss of 39.19 million yuan, an increase of 13.23% over the same period last year.

The net cash generated by the company's operating activities was 48.27 million yuan, down 24.28% from the same period last year.

Comments:

Revenue decline, main business profit, deducting non-profit growth: in the first half of the year, the company realized 870 million yuan in revenue, 14.72% less than the same period last year, 223 million yuan in main business profit, an increase of 16.07% over the same period last year, and a net profit of 34.66 million yuan belonging to the parent company, a decrease of 12.87% over the same period last year. After deducting non-recurrent profit and loss of 39.19 million yuan, an increase of 13.23% over the same period last year. The net cash generated by the company's operating activities was 48.27 million yuan, down 24.28 from the same period last year. Last year's non-recurring gains and losses were reflected in the gains on the disposal of long-term assets.

The decline in costs is greater than the decline in revenue: in the first half of the year, the company achieved operating income of 870 million yuan, down 14.72% from the same period last year. At the same time, the company's operating cost was 643 million yuan, down 22.29%. In terms of sales expenses, 29.01 million yuan in the first half of the year, an increase of 58.79 percent over the same period last year. This shows that the company has increased the sales of its products with the help of its own sales platform. The principle that we judge the decline of corporate revenue is the market factor and the industrial integration factor, especially the latter.

Practice internal skills and strengthen physical fitness: since the beginning of this year, the company has taken the construction of modern agriculture as the main line and the improvement of development quality and efficiency as the fundamental task, highlighting the four focal points of professional leadership, financing function, agricultural scientific and technological innovation, and management efficiency improvement, and actively promote the structural reform on the agricultural supply side. The branch has effectively implemented the policy of "retiring and returning land", formulated and improved unified management measures, and the decentralized state of land has been significantly improved. At the same time, unified product management has been vigorously promoted. Further deepen the covenant relationship of value community and interest community between leading enterprises, base branches and growers. Each branch takes the initiative to seek orders from the market, vigorously carry out unified management of products, and gradually establish their own stable sales network. And at present, the company has basically achieved full coverage in the unified management of agricultural materials. The proportion of unified supply of major crop seeds, chemical fertilizers, plastic film and other means of production by all companies has basically reached 100%. In addition, the company's industrial structure has been further optimized, and the management and control of the group has also been strengthened.

The company's future performance is flexible. Although the company has encountered many difficulties and great downward pressure in recent years, with the continuous optimization of the company's industrial structure and the improvement of the industrial level, the continuous improvement of internal management and the improvement of anti-risk ability, especially the company's layout of hops, fruits, alfalfa and potatoes will blossom and bear fruit in the next few years, coupled with the characteristics of large price fluctuations of these cash crops. In the context of inflation, both performance improvement and market opportunities will be greatly improved.

Earnings forecast and investment rating: we expect the company's earnings per share from 2017 to 2019 to be 0.11, 0.13, 0.17 respectively. It is predicted that the PE in the next three years will be multiple of that in 43-35-27. Considering that the company has great potential for development, we maintain the "overweight" rating of the company.