Event description The company released a 2013 performance forecast announcement on January 27. It is estimated that the net profit attributable to shareholders of listed companies in 2013 is expected to increase by 80%-130% compared with the same period last year, and the corresponding EPS per share is 0.11-0.14 yuan. Incident review companies have optimized their financing structure to reduce their financial expenses. In 2013, the company carried out debt financing by issuing short-term securities and corporate bonds to optimize the financing structure. The corresponding issuance interest rate was lower than the interest rate on bank loans during the same period, so its financial expenses fell year over year, which in turn improved the operating profit of the main water business year over year. At the same time, since the company's real estate projects are to be sold, deferred income tax assets generated by related asset projects have been confirmed. The net profit of the company's real estate business from January to October 2013 was -44.37 million yuan, which directly affected the company's profit level in the first three quarters. After divesting non-performing real estate assets, the company can also recover 320 million yuan of capital, which can be invested in the expansion of the main water supply and sewage treatment business. The company's 27.9% share in Paradise Silicon Valley's performance will double, directly contributing 68-90 million yuan in investment income. In 2011 and 2012, Paradise Silicon Valley's investment income in the company accounted for 99% and 88% of the company's net profit, respectively. It can be seen that the company is extremely flexible with regard to venture capital performance. Currently, Paradise Silicon Valley has managed a total of 139 projects with paid-in capital of 7.2 billion yuan, and a total of 7 IPOs, of which 5 are direct shares in Paradise Silicon Valley, and 4 IPO projects that have not left the conference, with a total market value of 410 million yuan. M&A funds are expected to raise 2.1 billion yuan in capital. The above projects are expected to bring profit contributions of 240 million yuan and 320 million yuan respectively in 2014 and 2015, respectively, contributing 67 million yuan and 89 million yuan to the company's investment income. The company plans to raise 745 million yuan through private targeted distribution, expand the Zhoushan water plant and pipeline construction projects, and continue the expansion of the main water business in an extended manner. Currently, the scarcity of domestic water resources and increasing water pollution are directly increasing demand for water supply and sewage treatment services, while domestic water prices are in a cycle of price increases. The combination of the two means that the expansion of the company's main water business will increase business revenue. At the same time, the company's management expenses and sales expenses still have room for improvement compared to other similar companies. If expenses can be managed continuously, its profit growth rate will increase further. The EPS for 2013, 2014, and 2015 is expected to be 0.13, 0.35, and 0.52, respectively, maintaining the “Highly Recommended” rating. In summary, we reaffirm that in 2014, the venture capital industry will be the segment with the most growth and room for valuation improvement in the diversified finance industry. On the one hand, the restart of IPOs and the formal expansion of the new third board will repay its exit benefits; on the other hand, new venture capital cooperation models such as mergers and acquisitions will enable it to play a more effective role in combining industry and capital, and ensure the stability of the industry's growth rate. We highly recommend Lu Xin Venture Capital and Qianjiang Water Resources.