Investment Rating - The investment rating for the company is maintained at "Buy" [1] Core Views - The company has shown continuous improvement in orders, indicating a turning point in operations. The revenue for 1H25 reached 9.528 billion RMB, a year-on-year increase of 2.49%, with a net profit attributable to shareholders of 358 million RMB, up 3.95% year-on-year [1] - The company’s decoration business revenue grew, with a notable recovery in the scale of income, attributed to a continuous increase in order growth over the past nine quarters [2] - The company achieved new signed orders of 12.46 billion RMB in 1H25, marking a year-on-year increase of 2.5%, with significant growth in orders from Guangdong and Sichuan regions [4] - The company maintains a target price of 4.31 RMB, reflecting a 20x PE valuation for 2025, with projected net profits of 574 million RMB for 2025 [5] Summary by Sections Financial Performance - In 1H25, the company reported a total revenue of 95.28 billion RMB, with a net profit of 3.58 billion RMB and a non-recurring net profit of 3.31 billion RMB, showing a year-on-year increase of 14.19% [1][2] - The comprehensive gross margin for 1H25 was 13.71%, a slight increase of 0.04 percentage points year-on-year, with the decoration and design business gross margins at 12.52% and 31.26%, respectively [2] Cost and Efficiency - The expense ratio for 1H25 was 7.68%, a decrease of 0.20 percentage points year-on-year, with improvements in accounts receivable turnover ratio to 0.74 times [3] - The company reported a net cash flow from operating activities of -1.023 billion RMB, which was a reduction in outflow by 167 million RMB year-on-year [3] Order and Market Dynamics - The company has signed new orders for nine consecutive quarters, with a significant increase in overseas revenue by nearly 29% year-on-year [4] - The company’s order growth is driven by enhanced regional focus and optimization of business structure, including urban renewal and clean technology development [4] Profit Forecast and Valuation - The company’s projected net profits for 2025-2027 are 574 million, 602 million, and 624 million RMB, respectively, with a CAGR of 4.28% [5] - The company is valued at a PE of 20x for 2025, with a target price set at 4.31 RMB, indicating a potential upside from the current market price [5]

Core Viewpoint - Hangzhou Garden (300649.SZ) is facing an administrative penalty of 7.38 million yuan due to illegal subcontracting of an EPC project, as determined by the Nanchang Housing and Urban-Rural Development Bureau [1][2]. Group 1: Administrative Penalty Details - The Nanchang Housing and Urban-Rural Development Bureau has initiated an investigation into Hangzhou Garden for alleged illegal subcontracting of the EPC project along Jinshan Avenue [1][2]. - The total penalty includes an administrative fine of 320,000 yuan and the confiscation of illegal gains amounting to 7.06 million yuan, totaling 7.38 million yuan [2]. - Hangzhou Garden has the right to contest the findings and penalties within five working days of receiving the notice [2]. Group 2: Legal Background and Previous Penalties - Hangzhou Garden has previously faced penalties for similar violations, including a confiscation of 13.86 million yuan in illegal gains and a fine of 533,000 yuan in 2022 [3][4]. - The company had previously appealed against these penalties, which were later revoked by the Nanchang Housing and Urban-Rural Development Bureau in January 2024 [4]. - As of the end of 2024, the contract asset balance related to the case was reported at 45.14 million yuan, with a provision for contract asset impairment of 4.68 million yuan [4]. Group 3: Industry Context - The design capability has become a core competitive factor in the landscape and greening industry, with the EPC model gaining traction for its integrated approach to design and construction [3].