Matters: The company announced that it has received the “Notice of Winning Bid for the Hedong New Area Sponge City Construction Phase I Renovation and Lianmeng River Water System Management PPP Project” from the Hedong New Area Construction Bureau of Suining City, confirming that the company was not a winning consortium for the first phase of sponge city construction and allied river system management PPP projects in Hedong New District of Suining City. The total investment of the project is 1 billion yuan. Comment: Continued winning bids highlights competitive advantages, boosting the company's performance inflection point until the consortium formed by the company, the North China Design and Research Institute of Municipal Engineering, China Construction Third Bureau Group, Beijing Tianhua Greening Engineering Co., Ltd., and Beijing Xiangkun Water Construction Co., Ltd. won the bid. Since the company has outstanding competitive advantages in the field of sponge city planning and design, and the comprehensive platform has begun to take shape, it is expected that the company will occupy a controlling position in the consortium. It is expected that the company will occupy a controlling position in the consortium. It is expected that the company will occupy a controlling position in the consortium. The partners within the consortium are the core force in the specific implementation and operation of the PPP project. The partners within the consortium are mainly used to supplement qualifications during bidding and contract construction in stages after winning the bid Lord. Suining is one of the first batch of 16 sponge city pilots. This project is also the second sponge city PPP project for which the company has officially won the bid. The continuous bid of the pilot city highlights the company's outstanding competitive advantage in the sponge city field. Currently, the company always has sponge orders of about 2.1 billion yuan. The company's early implementation of the Sponge City PPP project fell somewhat short of market expectations, mainly due to the large number of departments & fields involved in the Sponge City project and the long sponge order conversion cycle. As local experience gradually accumulates and the assessment and acceptance time gradually approaches, the release cycle of the Sponge PPP project is expected to accelerate, and the company will benefit accordingly. The PPP project is scheduled to be built for two years. According to the schedule, the winning bidding consortium will jointly form a project company (90% social capital investment) with government funders. Considering that it will still take some time to prepare for the completion of the project company establishment and subsequent bidding, the intensive commencement of construction and the flexible release of performance of the project may be mainly concentrated in 2017. In addition to winning bids for Qian'an and Suining projects, sponge project companies such as Pingxiang, Fuzhou, and Yuxi are also actively participating and progressing steadily. It is not ruled out that there is still a possibility that projects will be implemented in the second half of the year, boosting the company's performance in 2017 with remarkable flexibility. The PPP wave is raging, and central government departments such as the Ministry of Finance and the Development and Reform Commission have been searching for sustainable enterprises. Since the fourth quarter of 2014, demand for resolving local debt pressure, providing high-quality and efficient public services, and steady growth have led to a continuous expansion of the total scale of PPP projects. As of the end of June 2016, the total investment in projects stored in the Ministry of Finance's PPP comprehensive information platform had reached 10.6 trillion yuan. Furthermore, judging from the project implementation situation, the project implementation rate is steadily increasing. For the environmental protection industry, from the perspective of the shift from the government's core focus to the effectiveness of environmental management and the characteristics of PPP projects themselves (large scale, outstanding system integration characteristics), etc., the promotion of the PPP model in the field of environmental protection places higher demands on environmental protection enterprises. The social capital that can effectively complete PPP projects must have strong capabilities in technology development & integration, investment and financing, model innovation, and resource integration. This is also the core competitiveness of enterprises to continue to obtain high-quality PPP orders. PPP projects are government medium- to long-term service procurement. In order to prevent partners from continuing the traditional engineering mindset of “making quick money” and to ensure that the quality of subsequent service procurement can be maintained at a high level, local governments tend to cooperate with large enterprises with outstanding competitive strength when selecting partners. Driven by the above factors, large-scale promotion of PPP means that the competitive threshold of the industry will surely rise, promote industry integration and survival of the fittest, and leave behind enterprises that can truly create value and achieve sustainable development. As far as the company is concerned, relying on the accumulation of past technical & practical experience and Tsinghua University resources, the company has outstanding competitive advantages in the field of sponge city planning and design, and with the promotion of additional development, fund establishment, qualification supplements, and new business layout, etc., the company already has capabilities in technology, investment and financing, model and system integration, etc., and a comprehensive platform company is being formed and improved. The company can continue to provide high-quality services to the community and meet the government's procurement needs for efficient payment. Risks indicate uncertainty in the progress of issuance; uncertainty about the bidding and construction progress of sponge city projects, etc. Maintaining the “buy” rating, the PPP project that won the bid for this time is quite expensive, but it is still within expectations. Affected by factors such as the long order implementation and conversion cycle in Sponge City, the time of winning the bid for the company's previous sponge PPP project was delayed, and the total scale was also lower than expected. Accordingly, we lowered the 2016-2018 EPS forecast to 0.01/0.23/0.30 yuan (the original forecast was 0.11/0.32/0.42 yuan, considering the completion of additional distribution in 2016). The current stock price corresponding P/E is 831/47/35 times. The company's core focus is: (1) the main investment line of sponge city is clear, and the holding subsidiary has outstanding advantages in the most critical planning and design process and has the scarcity or even uniqueness of investment targets; (2) from the equity relationship, it can be seen that the company is expected to become an important layout of the clean-up and control system environmental protection strategy, and continued resource integration is worth looking forward to; (3) PPP projects in sponge cities such as Qian'an and Suining have been implemented and new projects are expected to accelerate, and new projects are expected to accelerate. The completion of additional development will help the company usher in a period of explosive performance starting in 2017; (4) Pingshan provides significant potential land value Safety marginal support. Taking into account the above factors, we believe that the company should enjoy a valuation premium compared to the industry, giving it 50 times P/E in 2017, with a target price of 11.60 yuan. At the same time, considering the scarcity of targets, the elasticity of performance, and the good development prospects of sponge cities, etc., the company has outstanding medium- to long-term investment value and maintains a “buy” rating.