Incident: We recently conducted on-site research on Environmental Energy Technology. The findings and investment suggestions are as follows. Comment: 1. The operating sewage treatment capacity is growing steadily, and the capacity utilization rate still has room to rise. The company's current operating sewage treatment capacity is about 70W m3/day, and the average winning water price is about 1.1 yuan/square meter. Considering that the company currently pays value-added tax according to 17.00% of product sales revenue and operating service revenue, of which the operating services are revenue from sewage treatment services, the VAT rebate ratio is 70%. Based on the company's operating service revenue of 137 million yuan (excluding tax) in 2016, the average annual production capacity of the company's operating sewage treatment capacity in 2016 The utilization rate should be around 56%, and there is still room for increase in the capacity utilization rate. The reason is that the company's magnetic separation technology is mostly used for emergency sewage treatment and other projects. Only some projects have promised water volume, and the average water volume is unstable. 2. It has a location advantage. Magnetic separation water treatment technology has a high degree of coupling with emergency black and smelly water treatment needs. Judging from the current market situation, under policy catalysis, opportunities such as the “Ten Rules of Water”, “Urban Black and Smelly Water Remediation Work Guidelines”, “13th Five-Year Plan”, and “Opinions on Fully Implementing the River Chief System”, and “Opinions on Fully Implementing the River Manager System” will be released one after another, driving benefits for relevant companies. The company is located in the Chengdu Plain and has a location advantage: in December 2016, the Sichuan Environmental Protection Department and the Quality and Technical Supervision Bureau organized the preparation of the “Sichuan Minjiang River and Tuojiang River Basin Water Pollutant Emission Standards” as the first watershed pollutant emission standard in the province. The document mentions that the Minjiang River and Tuojiang River basins in Sichuan Province will be divided into key control areas and general control areas according to the water pollution characteristics and environmental protection requirements of the Minjiang River and Tuojiang River basins. The company's magnetic separation water treatment technology is particularly suitable for emergency treatment of dark and smelly water bodies and decentralized sewage treatment in villages and towns due to its high performance, small footprint, ease of movement, etc. for dissolved and undissolved pollutants. 3. Profit forecast and investment proposal Since 2016, the company's business has expanded from manufacturing and sales of equipment focusing on metallurgy, coal and other industrial sewage treatment to fields such as centrifuges, black and smelly water treatment investment and operation, and sewage treatment engineering turnkey services, and transformed into a comprehensive water treatment service provider. In addition, the share of new businesses such as centrifuges, operation services, and municipal sewage investment and operation increased significantly in 2016. In addition, benefiting from factors such as base effect and 70% VAT rebate on sewage operating income, etc., the company's profit increased significantly. It's obvious. Overall, the company's revenue structure will continue to be adjusted in 2017. The revenue and share of municipal sewage investment and operation business is expected to continue to rise, and the expansion of PPP and other projects related to water environment treatment can also be maintained. The “Ten Rules of Water” put forward clear requirements for the treatment of black and smelly water bodies at various points. At the end of 2017, municipalities directly under the Central Government, provincial capitals, and built-up areas of planned separate cities are required to basically eliminate black smelly water bodies. This year, as an important time for assessment, the company's magnetic separation water purification technology has advantages such as rapid deployment and small footprint, and is likely to be favored by the market; the establishment of Xiong'an New Area will release the demand for water pollution control in North China ahead of schedule, and the company has laid out many businesses such as municipal sewage investment and operation, which are expected to benefit. Judging future performance, considering that traditional industrial sewage treatment equipment is expected to be relatively stable this year due to the recovery of downstream industries such as steel and coal in 2016. At the same time, the operating business and municipal sewage investment and operation business are expected to benefit from steady growth in policies such as Shuijiao and the establishment of Xiong'an New Area. The company's revenue scale for 2017-2018 is expected to be 1,233/1.46 billion yuan, respectively, and the net profit is 134 million yuan and 164 million yuan, respectively. The corresponding EPS is 0.72 and 0.88 yuan/share, respectively. The company currently has a total market value of about 4.4 billion yuan, which is 33 times and 27 times the corresponding PE valuation in 2017 and 2018, respectively, and maintains a “Prudent Recommendation - A” rating. Risk warning: risk of falling traditional business income due to the downturn in the metallurgical and coal industries and falling demand for water treatment; risk of large bad debts; risk of large-scale systemic risk.