Performance review CLP Yuanda released its 2015 interim report on the evening of the 27th. Revenue was 1,736 billion yuan, down 3.09% from the previous year. Net profit was 230 million yuan, up 27.68% year on year. The company's performance in the first half of the year was hampered by a slowdown in the flue gas treatment EPC business and a sharp decline in the denitrification catalyst business. The company reduced its holdings of Southwest Securities to hedge against some of the downward pressure on performance. Business analysis The franchise business increased significantly in the first half of the year: during the reporting period, the company's franchise business completed a total of 6 projects, achieving a profit of 160 million yuan, accounting for 51.78% of the company's total profit, up 17.22% from the same period last year. The completion of most franchise projects will help maintain the stability of the company's future performance. However, it is important to note that no more projects have been added recently, so it will be difficult for the company to maintain a high growth rate in this field in the second half of the year. We expect that in the future, the company will continue to increase its franchise business to hedge against poor performance in environmental engineering and denitrification catalyst business. The high gross profit of the franchise business will increase the company's overall profit level. The growth rate of the flue gas treatment EPC business has slowed, and the denitrification catalyst business is under pressure: in the first half of the year, the company achieved revenue of 893 million yuan in the environmental protection engineering sector, a year-on-year decrease of 8.06%. The slowdown in the company's growth rate in the traditional EPC business is in line with our judgment on the entire industry. We expect the company to continue to face the pressure of intense market competition in this field. At the same time, we believe that the sharp decline in the denitrification catalytic business is a normal reaction to the sharp expansion of the market in 2013-2014, and the major manufacturers in the industry have experienced a decline in business scale to varying degrees. We believe that there is still pressure on performance in the short term, and that the market needs to clear small and medium-sized manufacturers before market prices can gradually return to normal levels. New growth points still need to be cultivated over a long period of time: the company's business scale in water and nuclear solid waste treatment is still small. The total revenue for the first half of the year was less than 100 million yuan, but it is growing rapidly. We believe that it will still take time for the company to develop new performance growth points. Although recent problems with third-generation nuclear reactor tests may suggest a potential delay in the completion period of the Shandong Haiyang nuclear power plant project, we still believe that the company's business in the nuclear solid waste treatment sector faces a potential market of tens of billions of dollars. Once the third-generation reactor project is fully launched, the company will continue to benefit. Profit adjustment Our EPS forecast for 2015/2016 to the company is 0.61/0.59 yuan. The corresponding net profit was 366/354 million yuan, respectively. The investment recommendation is to maintain the target price of 24.7 yuan, corresponding to 20.8x15EV/Ebitda, and maintain an increase in holdings rating.