The main points. Tianrui Instruments released its 2016 semi-annual performance forecast today, achieving net profit attributable to shareholders of listed companies of 3440.71 to 37.1597 million yuan, an increase of 25-35% over the previous year. The estimated amount of non-recurring profit and loss during the reporting period is about 15.6 million yuan. The increase in performance was mainly due to the Tianrui environment consolidation. In April 2015, the company used the overraised capital of 135 million yuan to acquire 100% of the shares in Ding Environmental Protection, and then changed its name to “Tianrui Environmental”. Tianrui Environmental specializes in the design and construction of environmental protection projects, and has rich experience in industrial wastewater treatment, environmental protection operations, and sales of water treatment chemicals. Tianrui Environmental's revenue was consolidated in May 2015, and the 2015-2017 performance commitments were 12, 15, and 18 million yuan, respectively. “Tianrui Environmental” achieved a profit of 12.1492 million yuan in 2015, reaching its performance promise. It is expected to achieve net profit of about 7.3 million yuan from January to June 2016. Due to the concentration of environmental protection project settlements in the second half of the year, it is expected that the annual performance promise can be fulfilled. In May-June 2015, Tianrui Environmental achieved net profit of 3.4298 million yuan. The consolidated net profit for the first half of this year increased by about 3.9 million yuan compared to the same period last year. Even if the company's traditional instrument business performance in '16 and '17 is the same as in '15, the fulfillment of Tianrui's environmental performance promise will bring the company at least 25% or 20% growth. Also, since there were only 8 months of consolidated revenue in 2015, performance growth is expected to be higher than this level. Benefit from growing demand for monitoring in emerging fields such as soils and VOCs. As a leading enterprise in the analytical instrument industry, the company has strong technical strength. The company's average R&D expenses in the past five years were 37.62 million yuan, and the average R&D expenses accounted for 12.35% of sales revenue. By the end of 2015, the company and its subsidiaries had obtained 196 authorized patents. The company established an environmental protection division in 2015, which specializes in R&D, production, after-sales and sales of environmental monitoring instruments. With years of accumulation, it now has a full range of portable heavy metal detection and online testing products, and continues to enrich the product line, involving products such as soil monitoring, VOCs online monitoring, biotoxicity testing, online monitoring of pollution sources, online monitoring of surface water, and online air quality monitoring. With the rise of markets such as soil and VOCs control, front-end monitoring demand will take the lead, driving the growth of the company's traditional monitoring instrument business. Industrial funds help the company expand its outreach. The company adheres to the long-term strategy of “using capital advantages, carrying out industrial mergers and acquisitions, and expanding the company's business area”. In April 2016, the company officially invested and established the “Oriental Tianrui M&A Fund (Limited Partnership)” with Shanghai Oriental Ruide. The M&A fund invested a total of 301 million yuan. As a limited partner, Tianrui Instruments pledged 61 million yuan, accounting for 20.27% of the total investment. The M&A fund focuses on the industrial integration of Tianrui Instruments, and mainly invests in the fields of environmental protection, food safety and life sciences. Using the financial advantages of M&A funds, combined with its own advanced analysis and monitoring technology and equipment, the company will promote its industrial chain layout in the field of environmental monitoring and control. Profit forecasting and valuation. The company is expected to achieve net profit of 8,472 and 112.47 million yuan in 2016 and 112.47 million yuan respectively, corresponding to EPS of 0.18 and 0.24 yuan respectively. It is expected that Tianrui's environmental performance promises can be fulfilled, and the analytical instrument industry will encounter the “Ten Rules of Earth” opportunity in 2016. Comparing the valuation situation of companies in the same industry and the application of the company's products in emerging fields such as soil monitoring and medical care, the company will be given a purchase rating of 85 times PE compared to 2016, corresponding to a target price of 15.3 yuan. Risk warning. 1. Tianrui Environmental's performance promises for '16 and '17 fell short of expectations. 2. Demand for the company's related products did not meet expectations due to slow policy advancement in the soil and VOCs sector. 3. Shortage or loss of core technical personnel. 4. Competition in the industry intensified, and gross margin declined.