Incident: The company released its 2018 annual report. In 2018, the company achieved total revenue of 523 million yuan, an increase of 185.01% year on year; net profit to mother was 52 million yuan, an increase of 50.60% year on year. At the same time, a profit distribution plan was announced, with 1.00 yuan (tax included) for every 10 shares. The company also released its 2019 quarterly report. In the first quarter of 2019, the company achieved revenue of 98 million yuan, a year-on-year decrease of 46.59%; net profit to mother was 0.19 million yuan, an increase of 19.52% over the previous year. Comment: Gross margin and net margin declined, and operating cash flow improved: The company achieved a gross profit margin of 25.50% in 2018 (48.44% in 2017), a year-on-year decrease of 22.94 pcts; achieved a net profit margin of 10.00% (18.93% in 2017), a year-on-year decline of 8.93 pcts, mainly due to an increase in the share of general contracting business with low gross margin and net margin. The company's net operating cash flow for the full year of 2018 was 40 million yuan, up 91.82% year on year, mainly due to the company's EPC project and operating cash flow changed significantly; net investment cash flow was -30 billion yuan, an increase of 810.43% year on year, mainly due to the company's renovation of new office buildings in 2018; net financing cash flow was -10 billion yuan, down 189.68% year on year. Garden design has developed well, and the expansion of the general engineering contracting business has achieved remarkable results: the company's main business consists of two parts: garden design and general engineering contracting business. Among them, the garden design business achieved revenue of 171 million yuan in 2018, an increase of 14.23% over the previous year, and a gross profit margin of 54.33%, a decrease of 2.56 pct over the same period in 2017; the general engineering contracting business achieved revenue of 352 million yuan, an increase of 940.38% year on year. The company's landscape design business is developing well, and revenue has maintained relatively rapid growth. The general engineering contracting business achieved a year-on-year increase of 940.38% in revenue throughout the year, with remarkable results in scale expansion. Successfully undertook major projects, with sufficient orders in hand: the company seized opportunities for industry development during the reporting period, drove engineering business with high-quality design services, completed general contracting (EPC) projects such as the Boao Corridor Landscape Enhancement Project, Boao Dagong National Park, and Boao Binhai Avenue Greening and Upgrading Project (EPC), and successfully undertook and promoted a number of major projects, in particular the Xiong'an New Area Urban Forest Construction Implementation Plan (2018-2022), the ecological flood control landscape in the Huanqu District, and embankment design projects such as the Wuhan World Military Games (EPC) General contracting services such as contracting and general contracting projects for tourism infrastructure support projects in Liangzhu Ruins Park have further enhanced the influence of the “Hangzhou Garden Design Institute” brand. Since 2018, the company has announced orders for major projects totaling nearly 700 million yuan, and there are sufficient orders in progress. Financial forecasting and valuation: The company is expected to achieve net profit of 0.69/0.90/117 million yuan in 2019-2021, an increase of 32.2%/30.5%/30.0% year-on-year, corresponding EPS of 0.54/0.71/0.92 yuan. The current stock price corresponding to the 2019-2021 PE is 47.9/36.7/28.2 times. The company's transformation to the EPC model has achieved remarkable results, has sufficient orders in hand, and maintains a “highly recommended” rating. Risk warning: The expansion of the EPC model falls short of expectations, and there is a risk of repayment.