Tianhuayuan is an environmental protection equipment company with potential that is based on chemical equipment, is progressing rapidly in the field of environmental protection equipment on the basis of mastering various technologies. 1. Based on decades of chemical machinery, the 2014 performance was reversed. Tianhuayuan traded assets with Huanghai Rubber in 2013 and entered the capital market. The Tianhua Institute was founded in 1958 and is currently located in Lanzhou, Gansu. It is one of the top ten key research institutes of the former Ministry of Chemical Technology and one of the three pilot units for science and technology system reform. In the past, it specialized in operating drying unit equipment, anodic protection equipment, twin-screw extruders, anticorrosive insulation pipes, cracking furnaces, instruments and other accessories, etc., and has established long-term good cooperative relationships with China Chemical, CNPC, Sinopec, etc. The business mainly involves chemical, petrochemical, coal chemical and other industries. In recent years, applications have expanded to fields such as electricity, metallurgy, environmental protection, agriculture, food, etc. The company's main business is divided into five major parts: chemical machinery (transmission equipment), chemical engineering and equipment (static equipment, rotating towers), materials and corrosion (non-metallic chemical equipment), automatic production process control and online analysis instruments, engineering supervision; environmental protection equipment such as RTO and energy-saving boilers has progressed rapidly in recent years. Currently, the company's main business is dryers. It began exporting to developed countries such as Germany, Japan, and Belgium two or three years ago, and initially began export substitution. As an enterprise that produces non-standard equipment, the increase in raw materials and products in its inventory indicates that the company's revenue is entering a growth channel. 2. A number of environmental protection project reserves are nearing an explosion period. Although the company mainly produces chemical equipment, its various businesses revolve around energy saving and environmental protection. Currently, pure environmental protection businesses (excluding energy-saving dryers) account for more than 20%. The company has prepared two promising environmental protection equipment development directions: 1. Sludge treatment equipment: The 2014 National Science and Technology Award was officially announced on January 9, 2015. At the National Science and Technology Award Conference held at the Great Hall of the People in Beijing, the “Integrated Technology for Sludge Agitation Indirect Thermal Drying and Clean Incineration of Composite Circulating Fluidized Beds” jointly completed by five companies including Tianhua Institute Co., Ltd. and Zhejiang University won the second prize of the 2014 National Science and Technology Progress Award. This technology uses a thermal drying technology process, uses low-grade waste heat steam as a heat source, and performs intermittent thermal drying of sludge through a thermal drying device, effectively solving the problem of efficient and clean combustion of low-grade, low-calorific value dried sludge. Tianhua Institute has built the first propeller sludge drying test device in China. The technology has high heat utilization, low energy consumption, low investment, and is easy to implement. Currently, 34 sets have been promoted and applied, achieving the goals of properly treating sludge, significantly reducing the amount of sludge, and reducing secondary pollution. Currently, Tianhuayuan Co., Ltd. is also undertaking the research project “Industrialization of Sludge Treatment and Disposal Technology and Equipment for Urban Sewage Treatment Plants”, a major national water pollution control and control science and technology project, and is promoting sludge drying treatment equipment at Tongji University. We believe that after entering the “13th Five-Year Plan”, sludge treatment may be forced as the back end of water treatment, and it is expected to be released after 2015. 2. Lignite water removal project: China's lignite is mainly distributed in regions with severe water shortages such as Inner Mongolia. Coal-fired thermal power plants are large water consumers. Lignite produces a large amount of water vapor during drying, and if not recycled, it will be wasted into the atmosphere. Steam pipe rotary drying technology is a process requirement of large production capacity and large specifications of pulverized coal in the pulverized coal drying field. It has achieved innovation in the coal humidification steam pipe rotary drying process and key structure of dryers. It has now been used in Baosteel and Pangang in industry, and is being promoted and applied to Guohua Electric Power Indonesia's 50-ton lignite quality improvement project, Shanxi Tianji Lu'an Chemical Co., Ltd., and the pulverized coal drying of Yunnan Wenshan Aluminum Co., Ltd., and the pulverized coal drying of Yunnan Wenshan Aluminum Co., Ltd. is expected to bring explosive demand for this type of equipment. 3. Small market-capitalized state-owned enterprises awaiting restructuring by research institutes. A state-owned enterprise under the China Chemical Group, the China Chemical Group has carried out asset replacement work on various listed companies under the China Chemical Group in the past few years, and we think it is more likely that state-owned enterprise reforms will be carried out in the future. Although the company is a research unit, it has carried out enterprise reforms in 1999, implemented employee shareholding before listing, and has accumulated some experience in market operations. Its R&D personnel are the main players, but they also have a full range of tasks such as pre-sales, design, construction, and after-sales. On November 19, 2014, Cai Ting, general manager of China Haohua Co., Ltd. (Academy of Sciences), which also belongs to the China Chemical Group, and Li Jianbin, director of the planning and development department, and others emphasized during inspection and research at the Tianhua Institute: they hope Tianhua Academy will clarify the direction of development, find its own development model, and double profits in 3 years. As a listed company, Tianhua Institute should take advantage of its capital market operation advantages and make a difference in introducing strategic investment and implementing institutional reforms. In 2015, the company will complete the 3-year performance review period and formulate the 13th Five-Year Plan. We speculate on the next direction of the Tianhua Institute's reforms: 1. Introduce strategic investors to expand business areas and improve operational efficiency; 2. Continue to strengthen capital market operations and revitalize state-owned assets; it is not ruled out that surplus assets of the China Academy of Chemical Sciences will be injected one after another in the future. In December 2013, the China Academy of Chemical Research, the majority shareholder of Tianhua Academy, promised not to restructure within one year. After completing one year in December 2014, the restructuring time window just opened. The nine unlisted research institutes under the China Chemical Research Institute (belonging to the China Chemical Group), the majority shareholder of Tianhua Institute, are all in the chemical sector. In the context of the comprehensive promotion of state-owned enterprise reform, high-quality research assets are expected to be injected. 4. Profit prediction and rating. The company promised net profit of 66.36 million yuan after deduction in 2015. We believe that the final year's results are more likely to result in excessive gambling. Earnings per share are expected to be 0.14, 0.25, and 0.43 yuan in 2014-2016, and the company's closing price on March 10 is 12.96 yuan, corresponding to the 2015 dynamic valuation of 52x. Considering that the company is in a reversal of performance growth and state-owned enterprise reform expectations, and since the company is an environmental protection target that the market has never recognized, the market space for reserve projects is huge. The company's business is expected to explode from 2015H2-2016. Currently, the market value is only 5 billion yuan, and there is plenty of room for future market capitalization. According to the 2016 32x target price of 13.76 yuan, the rating was increased for the first time. Risk warning. The economic downturn has affected the slowdown in the investment progress of downstream investors.