Incident: In 2016, the company's revenue and net profit to mother were 2.15 billion yuan and 216 million yuan respectively, up 142.68% and 112.16% year over year, respectively, falling short of expectations of 347 million 38%. Investment highlights: The company's 16-year performance fell short of expectations. The company's revenue and net profit to mother were 2.15 billion yuan and 216 million yuan respectively, up 142.68% and 112.16% year-on-year respectively, lower than the forecast of 347 million 38%. We expect performance to fall short of expectations due to factors such as the G20 meeting and slow order execution. It has the ability to undertake PPP project turnkey projects and work together to improve net profit margins. After years of mergers and acquisitions, the company has completed all links in the industrial chain, and is involved vertically and comprehensively in the water treatment industry chain, making it one of the few environmental management companies in the market that actually have overall solutions. Furthermore, the general contracting model can reduce intermediary links and increase the company's overall project profit margin. In December '16, a consortium formed by the company's wholly-owned subsidiaries and partners won the bid for the EPC project for the Poverty Alleviation and Relocation (Poverty Alleviation Ecological Immigration) construction project and stadium construction project in Shibing County, with a total contract amount of about 1,247 billion yuan. Referring to previous cases, the net profit margin of the water treatment turnkey model can be as high as 15-20%. The company's 2016 performance report shows a net profit margin of 10.15%, and there is still plenty of room for growth. The company actively mergers and acquisitions to expand and transform integrated environmental and energy-saving technology solutions providers and service providers. In 2015, the company invested in the establishment of a subsidiary of Xingyuan Energy Saving, which specializes in the comprehensive treatment and resource recovery of organic waste gas and waste liquid; held Yinjiang Environmental Technology and obtained its manufacturing capacity for energy saving and water treatment equipment; acquired part of Shanghai Haocang's shares and increased capital to enhance the informatization capabilities of the environmental protection business; and acquired Zhongyi Ecology to lay out ecological restoration and landscaping. Hon Hai Environmental Protection Holdings focuses on serving remote quality control of water quality monitoring equipment; mergers and acquisitions are three times three, which are conducive to market development and the acquisition and implementation of PPP projects; Xingyuan Jujin M&A Fund has completed investment in the solid waste industry. In December '16, the company successfully issued a one-year PPN of 250 million yuan, providing short-term financial support for further expansion. At present, the company is gradually completing the upstream and downstream layout of the industry, and at the same time actively expanding the environmental hotspot industry, gradually building itself into a provider and service provider of comprehensive environmental and energy-saving technology solutions. Investment rating and valuation: We lowered 16-18 net profit to 2.16, 3.74, and 536 million (previously 3.47, 5.98, 891 million yuan), and EPS was 0.52, 0.90, and 1.29 yuan/share, corresponding to 72 and 50 times the 17 and 18 valuations. We believe that the company will use the capital platform, rely on core environmental protection equipment strength, and gradually transform into an environmental protection system integrator and comprehensive environmental management service provider. We have clear strategic ideas, expect accelerated PPP order execution, high elasticity in performance growth and market value growth, and maintain a “buy” rating.