Key investment events: The company released its 2016 annual report and achieved operating income of 760 million yuan, a year-on-year decrease of 23.4%, net profit of -130 million yuan, a year-on-year decrease of 592.4%, and EPS of -0.18 yuan; in addition, the company also released the 2017 quarterly report, which achieved operating income of 200 million yuan, an increase of 64.3% over the previous year, while net profit turned a loss into a profit of 26.29 million yuan (same period last year - 15.9 million yuan). The performance is basically in line with expectations. Our comment The combustion ignition business declined significantly: from the revenue side, the company's combustion ignition business achieved operating income of 220 million yuan, a year-on-year decrease of 46.7%, the flue gas treatment business fell 11.5% to 4.0 yuan, and the water treatment business benefited from the growth of Innogreen, an increase of 17.1% to 130 million yuan over the previous year. Looking at gross margin, the company's overall gross margin fell 11.3 percentage points, mainly in the combustion and ignition business by 27.4 percentage points to 7.16%, while flue gas treatment and water treatment fell 2.5 and 3.4 percentage points to 13.7% and 26.0%, respectively. Asset impairment affected performance, and cash flow improved: In addition to a sharp decline in company performance and a decline in gross margin, asset impairment losses and management expenses also rose sharply. Among them, asset impairment loss/operating income, and management expenses increased by 6.0 and 5.0 percentage points to 9.4% and 16.6%, respectively. Judging from the repayment situation, the net cash flow from the company's operating activities was 240 million yuan, which is significantly better than last year's -120 million yuan. The main thing is that the company has increased its repayment efforts and received more government subsidies. The quarterly report turned a loss into a profit: The sharp increase in revenue in the first quarter of this year was mainly due to growth in ignition combustion and flue gas treatment businesses; the sharp increase in performance was mainly due to 1. Non-operating income increased by 410.6% to 32.52 million yuan, due to the disposal of rental housing; 2. The cost rate for the period fell 15.5 percentage points to 18.0%. The increase in holdings and incentives for new shareholders shows confidence: the company changed the majority shareholder to Fengli Wealth in June 2016. After the new shareholders were in place, equity incentives were first introduced in January of this year. It plans to grant 13 million stock options to 189 people, including the company's directors (excluding independent directors), senior management, middle management, core business (technical) personnel, and main managers of subsidiaries, at an exercise price of 7.53 yuan/share. The company's actual controller, **** Li, and other company directors, supervisors and senior managers (supervisors and senior management) (Management team) The plan is to increase the company's stock holdings by no less than 100 million yuan and no more than 1 billion dollars within 12 months (the maximum price increase is 15 yuan/share), demonstrating the management team's confidence in the future development of the company. Investment suggestion: Fengli Capital, the new shareholder of the company, is rich in industrial resources and is expected to bring vitality and diversified financing channels to Kerong. The company has formed an environmental governance platform, and future PPP orders will bring high flexibility in performance. We expect the 2017-2018 EPS to be 0.40 and 0.75, and the corresponding PE is 23X and 12X. Risk warning: PPP order expansion falls short of expectations, project progress falls short of expectations