In 2013, the company achieved operating income of 589 million yuan, an increase of 65.29% over the previous year; operating profit of 137 million yuan, an increase of 104.5% over the previous year; net profit attributable to the parent company of 143 million yuan, an increase of 92.71% over the previous year; and diluted earnings per share of 0.10 yuan. The main reason for the sharp increase in the company's revenue and profit is that the acquisition of Tiandiren Company was merged in August 2013. By the end of 2013, the company had 22 wholly-owned and holding subsidiaries, covering various fields such as urban municipal water supply and sewage treatment, garbage leachate treatment, environmental protection equipment and engineering business in the water and environmental protection industry chain. From August to December 2013, Tiandiren achieved a net profit of 71.028,900 yuan, accounting for 48.29% of the company's net profit. If this portion of profit was deducted, the company's net profit decreased by 3.17%. Affected by merger companies and the availability of fundraising funds, the company's expense ratio has declined significantly. During the reporting period, the company's gross margin decreased by 3.14 percentage points year-on-year. Among them, the tap water business was unable to cover the increase in costs due to the control of water prices in the Hanzhong region, and the gross margin fell by 6.78 percentage points; the engineering technology consulting service business reduced the overall gross margin of the business by 20.02 percentage points; the period expenses fell by 6.93 percentage points year-on-year. On the one hand, it was due to the reduction in interest expenses after the company's capital raised. The company's future outlook: 1) Municipal water supply and drainage is progressing steadily. The company's municipal water supply and drainage business accounts for nearly 50% of total revenue. By the end of 2013, the company's daily design water treatment capacity corresponding to the contract reached 1,497,500 tons. During the reporting period, 3 new sewage treatment and water supply and drainage projects were added, and 2 projects were put into operation. The water supply and drainage projects continued to advance steadily, becoming an important support for the company's current performance. 2) Acquire Tiandiren to enter the field of high-concentration wastewater membrane treatment. The company completed the wholly-owned acquisition of Tiandi People at the end of July 2013. Relying on its advanced technology and extensive treatment range, the company officially entered the field of high-concentration wastewater membrane treatment. In the future, the company will continue to step up efforts to expand downstream customers, thus making it the main growth point for the company's short to medium term performance. 3) Overseas technology helps companies open up rural water markets. The company's long-term focus is on constructing a water treatment equipment technology system adapted to the domestic water quality and characteristics of the urban market on the basis of overseas technology acquired and introduced, and applying it to the domestic market. In 2014/3, the company completed the acquisition of the Swedish company Josab. The small water purification equipment produced by the company has advantages such as small size and good effluent quality, and is suitable for the rural water supply market in China. Currently, the sewage treatment rate in villages and small towns in China is low. Based on China's water network data, we forecast that the national market size for water treatment in administrative villages will be about 100 billion yuan. At the beginning of 2014, the company reached a strategic cooperation agreement with the Shandong Provincial Housing and Construction Department on supply, drainage and pipeline network construction projects in 200 model towns in the province and projects such as upgrading, physical surface transformation and capacity expansion of existing water plants, thus taking the lead in opening up the rural water services market. According to the current population size and per capita water consumption and sewage volume of Baizhen, we expect the total investment scale of water conservancy construction for this project to reach 2.7 to 4.2 billion yuan, which has become the company's main long-term focus. Profit forecast and rating: Since Josab is still in a state of loss, and the Shandong Baizhen project is still in the framework agreement stage, we are not considering its impact on the company's performance. We expect basic earnings per share for 2014-2016 to be 0.12 yuan, 0.15 yuan, and 0.18 yuan respectively. Based on the latest closing price of 5.26 yuan, the corresponding dynamic price-earnings ratios are 44 times, 35 times, and 29 times, respectively. If the Shandong project and Josab products are promoted smoothly in China, it is expected to bring a significant increase in the company's performance and maintain the company's “increase in holdings” investment rating. Risk warning: the risk of the project not progressing as expected; the risk that Josab's technology and products will not be promoted as expected domestically.