Summary of the report: The first PPP order won the bid: In July 2016, the company won the bid for the sewage treatment plant network integration PPP project in Huangpu Town, Zhongshan City, with a bid amount of 263 million yuan, and signed a special management rights agreement with the Huangpu Housing and Construction Bureau in August. Among them, the construction period is 1 year, the project cooperation period is 25 years. During the franchise period, the sewage treatment service fee is 1.726 yuan/cubic meter, and the sewage treatment plant is planned to be 100,000 tons/day, which is expected to bring the company more than 60 million yuan in revenue every year. As the company's first PPP project, this project is also the first municipal sewage PPP project in Zhongshan. It has a good demonstration effect and also helps the company enter the PPP market and give full play to its advantages in capital, operation and engineering. Revenue from the water supply business declined slightly, but it is still the company's main source of cash flow; net profit declined due to a sharp decline in investment income: In the first half of 2016, the company's water supply business revenue was 295 million yuan, a decrease of 2.31% over the previous year, mainly due to a decrease in water sales volume. However, water supply business revenue still accounts for 44.33% of the company's total revenue, which is the company's main source of cash flow. In the same period, the company achieved net profit of 483 million yuan and net investment income of 456 million yuan, a year-on-year decrease of 49.33% and 49.63%, respectively. Fosun became the second largest shareholder, and “industrial operation+capital operation” drives development on two wheels: As the only state-owned listed company in Zhongshan, the majority shareholder Zhonghui Group successfully introduced Fosun Group in August 2014, which is the first batch of state-owned enterprise reform models in Guangdong Province. At the same time, in 2014, the company formulated a two-wheel drive development strategy of “industrial operation+capital operation”, focusing on “environmental protection+water”, and accelerating M&A. In May 2015, an industrial merger and acquisition fund was established; in July '15, Tianyi Energy was acquired to enter the solid waste market; in July '16, the first PPP project was launched. Valuation and financial forecast: The company's operating income for the next three years is estimated to be 14.30, 15.60, and 1,710 billion yuan respectively. The net profit attributable to the parent company will reach 9.82, 10.72, and 1,182 billion yuan, and EPS of 0.67, 0.73, and 0.80 respectively. Buy ratings. Risk warning: financial investment risk; merger and acquisition integration risk, etc.