Core point of view. The semi-annual report showed high performance growth and impressive engineering business performance: The company's revenue and net profit in the first half of the year achieved a high growth rate of more than 50%. The main reason is that the subsidiary municipal engineering company completed many projects such as municipal pipeline network renovation and water meter renovation due to continuous expansion of external engineering business, so engineering installation business revenue increased 147.28% over the same period last year, and net profit increased 127.26% over the same period last year, with impressive results. The company's gross margin for the first half of the year was 53.47%, a slight decline from 56.44% in the same period last year; net profit margin was 29.8%, slightly lower than the forecast of 30.62% in the same period of the year. The main reason for the decline in the company's profit level was the increase in repair costs, pipe network, and equipment depreciation costs due to the snow and ice disaster at the beginning of the year. In the future, with the continuous expansion of engineering installation business and the implementation of large-scale emergency water sources and other projects, the company's performance is expected to maintain a high growth trend. Environmental transformation is progressing steadily, and a comprehensive platform can be expected: The company has been actively expanding environmental protection business in the past 2 years, and the transformation layout has been progressing steadily. In the first half of the year, the company signed sewage treatment contracts with 141 enterprises, and the contract amount rose 25% year on year, which is expected to drive revenue growth in the sewage treatment business in the next few years; at the same time, the hazardous waste treatment business that the company laid out last year also began preliminary work such as the EIA of the Jiangyin Qinwangshan Industrial Waste Comprehensive Utilization Project in the first half of the year. In addition to this, the company is also actively exploring the water environment treatment market. The company is determined to transform and has a clear direction, and is expected to become the fastest growing environmental protection company in the next 3-5 years. Entering the first tier of sponge city and black and smelly river management, and embracing the trillion-dollar water environment treatment market: In March of this year, the company, Huakong SEG and Huaneng Technology jointly set up a 5 billion yuan industrial fund, mainly for Huasai's sponge city project construction and other environmental protection investments. This strong alliance means that Jiangnan Water has officially entered the trillion-dollar market for water environment management. Huasai and Huaneng are leading enterprises in these two major fields. Coupled with Jiangnan Water's excellent engineering and water service operation capabilities, it will produce synergistic benefits. Financial forecasting and investment advice. We are optimistic about the rapid growth of the company's engineering business in the future. The profit forecast was raised. The net profit attributable to 16-18 was 4.14, 5.80, and 759 million yuan (previously 3.80, 4.94, and 585 million yuan), respectively, and the corresponding EPS was 0.44, 0.62, and 0.81 yuan. The current valuation of comparable companies is 20 times PE in '16. We are optimistic that the company will transition from a traditional water company to a comprehensive environmental protection platform, giving a 40% premium, that is, 28 times PE in '16, raising the target price to 12.32 yuan, giving it a “buy” rating. Risk warning. Project progress falls short of expectations; project gross margin reduces risk; industrial fund cooperation progress is low expectations