Key elements of the report:

The performance of Pubang Garden has maintained a rapid growth rate in recent years, and the municipal garden business has begun to make efforts in the past 15 years, which has played a positive role in promoting the company's performance growth and performance balance. The company's business is actively transformed and upgraded, and it is active in management mode, business development, asset mergers and acquisitions and so on. Benefiting from the strengthening of environmental protection policies and increased investment, the company has a lot of room for development in the future, and the growth rate will still be fast. Maintain the company's "buy" investment rating.

Events:

The company released its 2014 annual report. In 2014, the operating income of Pubang Garden was 3.161 billion yuan, an increase of 32.06% over the same period last year. The net profit attributed to shareholders of listed companies was 398 million yuan, an increase of 30.52%, and earnings per share was 0.70 yuan, an increase of 27.27%. It is proposed to pay a cash dividend of 0.62 yuan (including tax) for every 10 shares, with an increase of 15 shares.

Comments:

1. The performance continues to maintain a rapid growth rate, the business scope continues to expand, and the business growth rate is more robust. The company's operating income grew by 32.06% in 2014, and the company has achieved a compound growth rate of 25% in the past four years. The company's business areas were further dispersed, with the proportion of income from residential business falling by 15 percentage points to 68%, that of tourism and holiday gardens remaining unchanged at 12%, and that of municipal gardens rising by 16 percentage points to 20%. In addition to the steady growth of the original business, the company has also completed the development of some new business areas. Since the establishment of the Municipal Engineering Branch in 2013, it has basically matured in operation after more than a year of development, and confirmed revenue of 624 million yuan during the reporting period, accounting for 19.75% of the total revenue, becoming the growth point of the company's business. In 2014, the company completed the first overseas real estate garden business towards nationalization. As the company's business areas and regional layout are more scattered, the dependence on the real estate industry is weakened, and the company's business stability is enhanced.

2. The gross profit margin is stable and is expected to rise slightly in the future. Although the landscape industry has become more competitive over the past year, the company's gross profit margin has remained stable. In 2014, the company's gross sales margin was 26.13%, up slightly from last year. Gross profit margin remains stable on the one hand because the gross profit margin of residential business is basically stable, on the other hand, because the proportion of municipal business with high gross margin is expected to increase further, the company's gross profit margin is expected to remain stable in the future. The company's 14-year three-year rate was 7.66%, a slight increase over the previous year, mainly due to an increase in financial expenses.

3. The company's business transformation and upgrading has taken a substantial step forward, groping for a new way of growth for the follow-up business. (1) the PPP Cooperation Agreement for the Baimahu Forest Park Project in Huaian City was signed in May 2014, which is the first municipal garden project in the garden industry to be carried out in the mode of PPP public-private partnership. Compared with the traditional mode of repurchase year by year after the overall completion and acceptance of the project, the payback risk is lower and the capital turnover rate is higher. This is an important step for the company to actively explore the success of business upgrading and transformation, and also marks the beginning of a differentiated development path in the expansion of municipal garden business. (2) in June 2014, Pan Asia Environment (International) Co., Ltd., invested by the company, was officially listed on the Hong Kong Stock Exchange, and there was strong cooperation among listed companies. from the point of view of business development, it can not only obtain the affirmation of more customers, but also greatly promote the implementation of the project in the later stage. From the perspective of industrial chain integration, it can give better play to the business form of "design as the forerunner and integrated design and engineering service", which plays a positive role in increasing the company's engineering business income, and it is a business cooperation with economic nature. the company will get a lot of customer resources and project income. The company actively explores the PPP model in business transformation, especially in project financing, which is in line with the policy trend and will play a huge role in promoting the company's business.

4. The company has made achievements in management innovation. (1) try out the partnership business model. In view of the increasingly stable development rhythm of the garden industry and the malpractice of its poor cash flow, in order to cooperate with the company's platform development strategy and fully mobilize the initiative and enthusiasm of the company's front-line staff, the company made use of the standardized business management foundation and brand stickiness accumulated over the years to implement the business operation mode of the partnership system, and during the reporting period Some of the projects within the company have adopted the model of partnership system and are carried out smoothly. (2) deepen the level of information management. Following the foundation of the previous information construction, the company launched the development and use of the Business decision Analysis system (BI) during the reporting period, so far, the company's information management has formally formed three major modules: business system, management system and data system, comprehensively improving the company's modern management level.

5. The financial support for the company's future business growth is basically adequate. Garden enterprises are typical capital-intensive enterprises, financial strength is one of the key factors to determine the future performance growth, the company is more solid in the financial support of the business. On the one hand, the company has more cash, low debt ratio and strong financing ability. At the end of 14 years, the company has 1.5 billion in cash on hand, the asset-liability ratio is at a low level of 34%, and the company still has great potential in debt financing and equity financing. On the other hand, the company began to innovate in the municipal business to try the PPP joint venture model, the source of project funds, reducing the project's demand for cash.

6. The garden industry is still in a period of rapid development, and the company has strong comprehensive competitiveness. The environmental protection industry where the company is located is a strategic emerging industry, beautiful China has become a national strategic goal, strong policy support, unprecedented intensity of investment in environmental protection, and huge space for the development of the industry. Although the company is in an industry affected by the downturn of the real estate industry and the reduction of municipal financial greening expenditure, this adverse impact is still only in the growth rate of the industry space, while the demand of the rigid industry is still very large. The company has advantages in garden design, brand, integrated service advantages, national development strategy layout and project cost risk management, information management and financing channels. The company has made substantial progress in business transformation and upgrading and management optimization in the past 14 years, and the competitiveness of the company has been further enhanced.

7. Profit forecast and valuation. We lower the company's profit forecast and expect the company's operating income from 2015 to 2016 to be 4219.75 million yuan and 55707 million yuan respectively, the net profit attributable to the shareholders of the parent company is 536.30 million yuan and 691.95 million yuan, and the earnings per share are 0.83 yuan and 1.08 yuan respectively. The share price (14.40 yuan) on March 11, 2015 corresponds to a price-to-earnings ratio of 17.65 times and 13.40 times, respectively. The company is aggressive in business transformation and upgrading and asset mergers and acquisitions, and we maintain the company's "buy" investment rating.

8. Risk hint. (1) the risk of further downturn in the real estate industry in the past 15 years; (1) the policy risk of poor implementation of local government environmental protection policies; and (2) the decline in the price of products and services caused by fierce market competition.