Event: according to the 2021 semi-annual report released on August 27th, 2021H1 achieved an operating income of 8.626 billion yuan, an increase of 24.00% over the same period last year, a net profit of 1.429 billion yuan, an increase of 235.53% over the same period last year, and basic earnings per share of 0.19 yuan, an increase of 159.81% over the same period last year.

Comments: excluding the impact of the disposal of some assets on profits, the company's performance growth rate is still at a high level.

The performance of 2021H1 increased significantly, realizing a net profit of 1.429 billion yuan, an increase of 235.53% over the same period last year, of which non-recurrent profits and losses totaled 667 million yuan, an increase of about 629 million yuan over the same period last year. The company's non-recurrent profit and loss mainly comes from the transfer of 40% of the equity of Deep Water Group and the first 60% of Jiujiang in order to focus on efficient and high-quality assets, which have an impact on the company's profits of 544 million yuan and 118 million yuan, respectively. Excluding the impact of non-recurring profits and losses, the company's 2021H1 deducted non-return net profit of 762 million yuan, an increase of 96.37% over the same period last year, and the overall performance still maintained a high growth rate.

Focus on the fine operation of the main water industry, and the scale effect is obvious. In 2020, the company's sewage treatment, water construction and tap water production and sales accounted for more than 67% of the company's total revenue, which is an important source of revenue. 2021H1 continues to focus on the development of the main water business, and initially realized the in-depth expansion of water business in villages and towns. 2021H1 increased its water treatment capacity by 39.74 million tons per day, of which sewage and water supply capacity increased by 3704 million tons per day and 270,000 tons per day respectively. At the same time, the company has completed part of the stock project water price adjustment, tap water production and sales and sewage treatment revenue have increased accordingly.

In the first half of the year, the company's urban water operation revenue increased by 24.90% compared with the same period last year, and operating profit increased by 46.34%; revenue from comprehensive water environment management increased by 19.26% compared with the same period last year; and revenue from water construction increased by 21.41% over the same period last year. The company has completed the layout of water affairs in 28 provinces and municipalities directly under the Central Government, with obvious economies of scale.

Solid waste business continues to expand and increase efficiency. At present, the company has a total of 73 solid waste treatment projects in China, with a total designed annual garbage disposal capacity of about 13.72 million tons and an annual disassembly of about 3.2 million pieces of electrical and electronic equipment.

2021H1 added 3200 tons of incineration capacity per day, and promoted Lushan, Duchang and other nine projects into construction, a total of 68 projects have entered the construction or operation period. In recent years, the company's solid waste business has been significantly improved through continuous capacity expansion and efficiency improvement. 2021H1's solid waste business revenue increased by 22.70% year-on-year, and operating profit increased by 35.21%.

Profit forecast: it is estimated that the company's net profit from 2021 to 2023 will be RMB 21.642559max, which is + 47.21%, 18.22%, 19.25%, corresponding to EPS 0.29, 0.35, and 8.56 times of the previous share price, PE, 10.21, 8.56, and maintaining the "Buy" rating of the company.

Risk hint: project expansion is not as expected; industry policy is not as expected; industry competition is intensified.