Incident: The company achieved operating income of 488 million yuan in 2016, an increase of 48.08% over the previous year; net profit of 69.53 million yuan, an increase of 33.24% over the previous year. The first quarter of 2017 achieved operating income of 96 million yuan, a year-on-year increase of 32.24%, and realized attributable net profit of 650,000 yuan, a year-on-year decrease of 110.54%. Core view performance was slightly lower than expected, and industry integration was underway: the company gradually transformed from an equipment manufacturer to a comprehensive water treatment service provider, with operating revenue of 137 million yuan in 2016, an increase of 67%; sales revenue of complete water treatment equipment fell 26.6%, mainly due to the metallurgical industry and the coal industry being affected by overcapacity supply-side reforms, and overall market demand shrank; in 2016, the company completed the acquisition of 65% of Sitong Environmental's shares (consolidated on December 1, 2016). The actual performance of Sitong Environmental was 1446.61 10,000 yuan, less than the promised performance of 17 million yuan; the actual performance of Jiangsu Huada was 309.302 million yuan, slightly lower than the promised performance of 33 million yuan. The scale of the operation project continues to expand, and the PPP project progresses as scheduled: as the company's supermagnetic separation water purification technology has a unique competitive advantage in the field of water environment treatment, and operating orders continue to increase, the “Beijing Pinggu District Luhe Dongdian Outbound Section Water Quality Improvement Emergency Treatment Project Government and Social Capital Cooperation (PPP) Project Investment Agreement” was signed with the Beijing Pinggu District Water Authority in September 2016, and the first PPP project was launched. After the acquisition of Sitong Environmental, the company will further expand its municipal water treatment business. Streamline the incentive mechanism: The first phase of the company's employee stock ownership plan has completed share purchases. A total of 914,120 shares of the company's shares have been purchased, accounting for 0.52% of the company's total share capital. The average price is about 31.91 yuan/share, and the lockdown period is 12 months. The 2017 equity incentive draft was released in March 2017. The plan is to grant 5.255 million restricted shares, accounting for 2.831% of the total share capital. Compared with 2016, the net profit growth rate for 2017/2018/2019 is not less than 30%, 70%, and 110%, respectively. Financial forecasting and investment proposals were completed and consolidated. We raised our profit forecast, that is, the company's net profit for 2017-2019 was 1.27, 1.64, and 227 million yuan (originally 1.09 million yuan and 117 million yuan in 2017-2018), and EPS was 0.69, 0.89, and 1.23 yuan, respectively (originally 0.62 and 0.66 yuan in 2017-2018). Comparing the company's PE to 39 times in 2017, we are optimistic about the company's first-mover advantage in managing the Black and Smelly River and the improvement in competitiveness after epitaxial mergers and acquisitions. We will continue to give a 10% valuation premium, or 43 times PE in 2017. The target price is 29.67 yuan, maintaining the “gain” rating. Risks suggest that project progress falls short of expectations; policy progress falls short of expectations