Incident: The company achieved operating income of 488 million yuan in 2016, up 48.1% year on year, net profit of 69.53 million yuan, up 33.2% year on year, with earnings of 0.39 yuan per share; distributed a cash dividend of 1.27 yuan (tax included) for every 10 shares transferred; and net profit loss of 0-2 million yuan (tax included) for every 10 shares transferred. It also led to overall profit growth, and equipment revenue declined slightly. The increase in performance in 2016 was mainly due to the merger and expansion of Jiangsu Huada, the target of the acquisition, and the merger of Sitong Environmental. By category, the centrifuge and ancillary business revenue was 191 million yuan (+338.5%, accounting for 39% of revenue). The sharp year-on-year increase was mainly due to the combined expansion of Jiangsu Huada; the operating services business revenue was 137 million yuan (+66.2%). The rapid growth was partly related to the volume of operation projects put into operation and the four-way environment. Revenue from complete traditional water treatment equipment was 149 million yuan (-26.4%). The decline was mainly due to a large decline in profits in the downstream coal and steel industry. The current recovery in the two industry cycles is expected to drive a steady recovery in separation equipment, and a return to the level around 2015 can be expected. The year-on-year loss of the company's net profit to mother in the first quarter of 2017 was mainly due to the increase in financial expenses and the overall decline in equipment sales due to merger with Sitong, etc., but equipment confirmation in the first quarter did not account for much of the performance throughout the year, and the impact was limited. The overall gross margin decreased, and the profit level of equipment increased slightly. The company's comprehensive gross margin in 2016 was 42.44% (-5.3pp). Seen separately, due to intense market competition, the gross margin of centrifuge and ancillary business (34.26%, -5.6pp) and operation services (47.34%, -9.3pp) declined, lowering the company's overall gross margin level; however, the gross margin of complete water treatment equipment showed a slight increase in good performance (46.90%, +1.14pp). The cost rate for the period decreased slightly (26.39%, -1.0pp). In a critical year for treating black and smelly water bodies, project volume led to endogenous growth. At the end of 2017, municipalities directly under the Central Government, provincial capitals, and built-up areas of planned separate cities will be required to basically eliminate black and smelly water bodies. Industry space is expected to be released at an accelerated pace, and the company's current operations are expected to break through from 600,000 m3/day to more than 800,000 m3/day. In April, the company signed the first large-scale framework agreement (2 billion yuan) with the Linwu County Government. Implementation of the actual project can be expected. The company itself and Sitong are expected to achieve performance growth and scale improvement in PPP projects within the year. Furthermore, the company has involved several mergers and acquisitions funds. Since its listing, epitaxial expansion has been rapid. Subsequent epitaxial expansion can be expected, and the environmental puzzle will be further improved. Equity incentives bind benefits, and establish safety margins with fixed growth and employee shareholding. Recently, the company launched equity incentives. According to the assessment target of the 2017-2019 company guarantee performance, it is estimated to be 91.53 million yuan, 120 million yuan, and 150 million yuan. If PPP is implemented and mergers and acquisitions are initiated later, it may exceed expectations. Currently, there is an inversion between the company's stock price and the additional offering price of 32.03 yuan/share and the share holding price of 31.91 yuan/share for Phase 1 employees, creating a certain margin of safety. Profit forecasting and investment advice. Combined with equity incentives, we expect EPS to be 0.75 yuan, 1.01 yuan, and 1.33 yuan in 2017-2019, corresponding PE is 39x, 29x, and 22x, maintaining a “buy” rating. Risk warning: risk of slowing the growth rate of the downstream industry; risk of market development falling short of expectations, etc.