Key investment events: A consortium formed by the company, Guotong Co., Ltd. and Guangdong Water Resources and Hydropower Construction Co., Ltd. won the pre-bid for the “Heilongjiang Muling City Fendou Reservoir and Water Supply Project PPP Project”. The review is as follows: The pre-bid for the reservoir water supply project was won, and PPP orders continued to be implemented. The “Heilongjiang Muling City Fendou Reservoir and Water Supply Project PPP Project”, which was pre-bid this time, is another reservoir water supply project following the Jinzhou Jinling Reservoir Water Supply Project which won the bid in 2014. The project uses the PPP model, with a franchise period of 28 years (excluding the construction period) and a construction period of 2 years. The water supply project includes four parts: water intake, water transportation, water purification, and water distribution. Recently (2020), the total water supply scale is 4 x 104 m3/d, and the long-term (2030) design has a total water supply scale of 8 x 104 m3/d. The total investment of the project is estimated at 492 million yuan, of which the total investment for the project part is 438 million yuan. Following the Liupanshui Sponge City Project (total investment of $1,668 million, of which 888 million in construction contracts, 800 million in demolition contracts, and 80.57% of the construction part has been completed), the company successively won bids for the Wenhe Wetland Ecological Protection and Comprehensive Utilization PPP Project (1.28 billion), the sewage treatment and pipeline network project in Longlou Town and Tongguling Tourist Area in Wenchang City, Hainan Province ($65 million) and this project. The company's PPP orders continue to land, reflecting strong business development capabilities and locking in future high growth. Respond to media reports and dispel market questions. Since 2015, the company has successively acquired 100% of KWI, the world's leading solid-liquid separation-dissolved air flotation (DAF) technology leader, and obtained 21.6% of Swiss Water's shares to obtain seawater desalination membrane technology, low-temperature multi-effect seawater desalination technology (MED), and zero waste water discharge treatment technology (ZLD) owned by IDE, the leading seawater desalination company, and acquired 67.65% of ITN, which has the world's most advanced nano-plate ceramic membrane technology, and 100% shares in international water expert DHT. Earlier, some media questioned iTN's losses for 7 consecutive years. We believe that for technology-based enterprises, from R&D investment to product launch to early marketing, it is difficult for the revenue generated to cover their R&D expenses, costs, and marketing expenses, and it is normal to incur losses. The company acquires overseas companies with the aim of obtaining advanced overseas technology, integrating the seawater desalination industry chain, and expanding the global market. After the company completes the integration of technology, products and channels, it will have a 1+1>2 effect. The company previously issued a media report clarifying the announcement, which dispelled market concerns. The employee stock ownership plan is superimposed on the equity incentive plan, and the incentive system is strong. On April 6, the company announced the employee stock ownership plan for 7 incentive targets. Among them, there are 6 directors and supervisors, and the investment amount accounts for 93% of the total investment amount (150 million yuan); the employee stock ownership plan fully subscribes to the sub-shares of the relevant trust plan, and priority and subdivision are set on a 1:1 basis. As of May 31, the company's employee stock ownership plan had purchased 2.3942 million shares of the company, with an average transaction price of 15.49 yuan/share. In addition, the company has completed the formal award of incentive shares for 36 executives. The restricted stock award price is 6.96 yuan/share, and the stock option exercise price is 14.08 yuan/share. The performance target is to deduct non-net profit of 1.4/2.1/30/380 million yuan from 2016 to 2019, respectively. The incentive system is very strong! Investment advice: Maintain an increase in holdings rating! The company's net profit in 2017 and 2018 is estimated to be 220 million and 320 million, respectively, with a current market value of 7.1 billion yuan. We emphasize: 1) the seawater desalination and sponge city PPP business continues to gain strength, actively building new hazardous waste business fields, and performance continues to increase or is only the beginning; 2) employee shareholders+limited incentives to complete executive interest binding; high execution conditions give a performance anchor, and sufficient on-hand orders guarantee high growth; 3) international extension is only the beginning, intensive targeting of Belt and Road water projects, and another breakthrough in the internationalization strategy; 4) the non-public offering raised 1.2 billion dollars, and the results and new orders were signed or accelerated as a result. Maintain the Accumulation Rating! Risk warning: Project progress is below expectations.