Key investment points: Magnetic separation technology solves emergency treatment of black and smelly water bodies, benefiting policies Companies with high industry prosperity are leading domestic magnetic separation water purification technology enterprises. With their technical strength, they have a leading edge in water treatment fields such as metallurgical turbidity and coal mines. Through continuous research and development, the company successfully applied supermagnetic separation water purification technology to the black and smelly water treatment market, and obtained projects in Beijing, Hebei Yanjiao, Shenzhen and other places with advantages such as small footprint, large amount of treated water, low construction cost, and fast results, and has initially completed a national market layout focusing on Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta, and Cheng-Chongqing economic zones. The “Ten Rules for Water” require municipalities directly under the Central Government, provincial capitals, and planned separate municipalities to basically eliminate dark and smelly water bodies by the end of 2017. The time is tight and the task is heavy. The company's technology is particularly suitable for emergency treatment of black and smelly water bodies, and will benefit from the release of orders driven by policy. At the same time, the company is actively combining magnetic separation water technology with high-efficiency biochemical composite treatment technology to achieve the first-class A standard of water quality after treatment of black and smelly water bodies. After successful project development, the company will obtain better orders. Taking advantage of the boom in the black and smelly water industry, the company is expected to achieve high growth. Continuously expand and improve the industrial chain. The initial formation of a water environment treatment service provider was based on industrial sewage treatment and continued to improve the industrial chain. In November 2015, the company acquired 100% of Jiangsu Huada's shares for 383 million yuan to get involved in the sludge treatment business, and promised that 2015-2017 net profit would not be less than 3000/3300/37 million yuan; in March 2016, it acquired 100% of Daoyuan Environmental's shares for 9 million yuan to enhance engineering consulting and design capabilities; at the end of 2016, the company used 210 million yuan The transaction consideration was to acquire 65% of Sitong Environmental's shares and enter the municipal sewage treatment sector. Sitong Environmental promised that the net profit after deduction from 2016 to 2018 will not be less than 1,700/2500/28 million yuan. The company's business already includes industrial sewage, municipal sewage and water environment treatment, forming a whole industry chain of equipment manufacturing, engineering contracting, operation, and sludge treatment, and the company's water environment treatment service provider has initially taken shape. Equity incentives bind executive interests, fixed increases, and employee share price inversion establishes a margin of safety. On March 27, 2017, the company announced a restricted stock incentive plan. It plans to provide equity incentives to a total of 164 executives, core management and technical personnel, including the company's general manager and financial director, at a price of 13.99 yuan/share, and award 4.255 million shares for the first time. The conditions for lifting the sales restrictions are that compared to 2016, the net profit growth rate after deduction from 2017 to 2019 was not less than 30%, 70%, and 110%. On the one hand, the company introduced equity incentives, which could bind the interests of executives, and the performance assessment goals also showed that the company is confident in future development. On September 23, 2016, the first phase of the company's employee stock ownership plan was to purchase the company's shares for 29.17 million yuan, with an average transaction price of 31.91 yuan/share, and the lockdown period was 12 months. In January 2017, the company completed the acquisition of 65% of Sitong Environmental's shares in a non-public offering to raise supporting capital. The issue price was 32.03 yuan/share, involving an amount of 174 million yuan, and the lockdown period was 3 years. Currently, the stock price is 22.85 yuan, and employee shareholding and fixed price increases have all been reversed by 28%, establishing a certain margin of safety. Profit forecast and investment rating: For the first time, we are optimistic about the advantages of the company's supermagnetic water purification technology and benefit from the boom in the black and smelly water body industry. The company's 2017-2019 EPS is expected to be 0.64, 0.86, and 1.12 yuan, respectively. Corresponding to the current share price PE, it is 35, 27, and 20 times, giving it an “gain” rating for the first time. Risk warning: risk of project progress falling short of expectations, risk of falling demand for water treatment in downstream industries, risk of falling short of expectations, risk of falling short of expectations, risk of macroeconomic downturn.