l Company Overview: A local state-owned water enterprise that is good at capital management and active expansion. The company's predecessor was Binhai Water Supply Company. It was founded in 2001 and listed in 2013 under the auspices of Sihuan Pharmaceutical. The actual controller of the company is the Tianjin Municipal Water Authority, with a shareholding ratio of 24%. It mainly engages in raw water and tap water business in the Binhai New Area of Tianjin. After the listing, the company was proactive, and increased the issuance and acquisition of Jiacheng Environmental Protection, and capital operations were frequent. Using the listing platform, the company opened a new chapter of growth. Expectations gap 1: The company's share of state-owned holdings is low, the share of competitive business is increasing, and expectations for state-owned enterprise reform are strong. After the acquisition of Jiacheng Environmental Protection, the share of state-owned Tianjin Water Holdings was reduced from 35% to 24%. If the acquisition is completed, the company's competitive business will account for more than 50%. Meanwhile, the Tianjin state-owned enterprise reform document indicates that by the end of 2017, more than 80% of core enterprises had diversified equity, of which mixed ownership accounted for a large share. Currently, there are also successful cases in the city, so the company's state-owned enterprise reform expectations are strong. Expectation gap 2: With the acquisition of Jiacheng Environmental Protection, the “technology+capital”, “state-owned asset+private enterprise” Beijing-Tianjin-Hebei market and PPP projects can be expected to expand. ① Jiacheng Environmental Protection is located in Shijiazhuang. It has the highest sewage treatment management qualifications in the industry. It has first-class technology and a good reputation in the industry, and the company's profitability is strong. ② The company's traditional dominant regions are Tianjin and Hebei, with serious water pollution and broad market space. ③ The history of the “state-owned asset+private” cooperation model in the water treatment industry has proven to be a very good business model. After the company acquires Jiacheng, the market share of Tianjin and Hebei is expected to further increase. At the same time, with the help of capital, Jiacheng Environmental Protection's acquisition of PPP projects throughout the country is also worth looking forward to. Expectation gap 3: Abundant cash, building a holding platform, and extensions can be expected. ① Since its listing, the company's capital operations have been frequent and active in external expansion, reflecting the management's ability to extend, and at the same time, the majority shareholders have given the company a lot of room for freedom; ② The company has 600 million yuan in cash, a loan financing capacity of more than 500 million yuan, and sufficient cash. In addition, the management is forge ahead and intends to build the company into a platform holding company. We believe that the company's expansion progress can be expected. Profit forecasting and investment ratings: The most flexible target for environmental protection reform of state-owned enterprises. We expect the company's profit for 15-17 to be 1.2/222/290 million yuan, EPS to be 0.43/0.77/1.04 yuan, respectively, and corresponding dynamic price-earnings ratios of 68 times, 37.5 times, and 27.9 times, respectively. The company currently has a market capitalization of more than 6 billion dollars, and the market value is too small among all water service operators, and the valuation is low; the company is forging ahead, and the strength of state-owned enterprise reform may exceed expectations. We believe that the company is currently the most flexible target for state-owned enterprise reform in environmental protection. The first target market value is 10 billion yuan, giving it a “buy” rating.