Incidents: From June to August 2017, Dongxu Blue Sky announced a number of favorable events. On the one hand, the company's environmental protection business has been stepped up, PPP projects have recently reaped a lot, and early framework agreements have also begun to be gradually implemented into winning bid orders. At the same time, the company's external expansion continues to gain strength, mergers and acquisitions have entered the hazardous waste treatment business; on the other hand, the company's original photovoltaic and real estate business also continues to advance. Overall, the business has blossomed and expanded vigorously into the field of environmental protection. Collaborative changes in business layout have also contributed to rapid growth in the company's performance. In the first half of 2017, the company achieved rapid growth of more than 50%, but from the second half of 2017, with the gradual increase in the profit contribution of the environmental protection business, the annual performance growth rate will be even higher. At present, the company has entered the fast track of development, and the increase in orders and business growth will gradually be realized. In view of the high growth rate that the company's performance will show in the next few years, it is given a “Highly Recommended - A” rating. 1) Rapid performance growth: The performance forecast for the first half of 2017 was released, and rapid growth of more than 50% was achieved in the first half of the year. 2) Orders have increased rapidly, and PPP projects have gained a lot recently. The early framework agreement has begun to be implemented as the winning order: From June to September 2017, the company signed a new 9.1 billion yuan PPP framework agreement for environmental protection business and won the bid for the 1.05 billion yuan Jinjing River landscape enhancement PPP project in Shandong Zhaoyuan (the company signed a strategic cooperation framework agreement for municipal ecological PPP projects with the Zhaoyuan Municipal People's Government in December 2016 to cooperate in the investment, construction, operation and management of PPP projects in ecological watershed management, municipal infrastructure, etc., in Zhaoyuan City. The planned total investment is 5 billion); in addition, the company's photovoltaic business continues to advance. In June-August, it won a number of new PV EPC orders and had photovoltaic power plants connected to the grid for power generation. 3) Extension expansion continues to gain strength, and mergers and acquisitions enter the hazardous waste treatment business: In July 2017, the company acquired 67% of Hongwei Environment's shares with 20 million yuan of its own capital to enter the hazardous waste treatment business in western Jiangxi. 4) Announcement of the 950 million employee shareholding plan. The interests of employees are highly tied to the interests of the company: the first draft employee shareholding plan was announced and submitted to the shareholders' meeting for consideration. Comment: 1. Net profit attributable to the first half of 2017 increased by more than 50% year on year. On June 6, 2017, Dongxu Blue Sky released its performance forecast for the first half of the year. The net profit attributable for the first half of 2017 is expected to increase by 50%-61.5% year-on-year. The main reasons for the rapid increase in performance include the increase in revenue and profit from the photovoltaic new energy business compared to the same period last year, the increase in revenue from power plants invested and built on the grid, and the company's entry into the environmental protection industry quickly received orders and increased profits. Judging from the pace of progress in PPP order settlement, the environmental PPP business is expected to contribute relatively little in absolute terms to net profit in the first half of the year. As the commencement of construction of PPP projects increases, the profit contribution of the environmental protection business is expected to increase significantly in the second half of the year, and the annual performance growth rate will be even higher. 2. Vigorously develop environmental protection business and enter the two major business areas of ecological treatment PPP and hazardous waste treatment. PPP is gradually being transformed from framework agreements to actual orders, and will eventually fulfill performance growth. Beginning in 2017, Dongxu Blue Sky has vigorously expanded into environmental protection business. It acquired Starview Ecology in May this year to enter the ecological management PPP business, and later acquired 67% of Hongwei Environment's shares in July this year to enter the hazardous waste treatment business in western Jiangxi. The future environmental protection business will collaborate with the company's existing new energy and real estate businesses to promote the company to become a comprehensive integrated service provider providing a green environment, green energy, and green per capita. (1) The PPP business has gained a lot recently, and the strategic framework agreement is gradually being implemented to win the bid. As can be seen from the company news, on July 28, 2017, Dongxu Blue Sky held a work launch meeting for the second half of the ecological and environmental protection industry. At the meeting, relevant officials in the ecological and environmental protection industry sector reported on their work goals and plans for the second half of the year. The leaders of various ecological and environmental protection PPP teams, including Starview Ecology, signed a certificate of target responsibility with the company. Through business development, Dongxu Blue Sky has recently gained a lot in the field of ecological and environmental protection PPP. The new framework agreement signed in June and the list of projects that won the bid are as follows. Judging from the type of project, at present, most of the projects are still at the framework agreement stage, but most of the company's framework agreements already include a phase of possible project planning. After two reviews and one case are passed, it will later be converted into an actual order and the final performance will be fulfilled.For example, the company's new PPP order of 1.05 billion in Zhaoyuan, Shandong, which won the bid on August 17, 2017, is a phase of the 5 billion yuan framework agreement signed in December 2016. Therefore, judging from current trends, corporate framework agreements have the ability to implement actual orders. In anticipation of new orders being signed in the future, the company's various ecological and environmental protection PPP teams, including Starview Ecology, have signed target responsibility certificates, and will do their best to develop the market and complete their respective order goals. Looking at Starview Ecology alone, in May 2017, when Dongxu Blue Sky acquired Starview Ecology, Starview Ecology's management shareholders promised that in 2017, 2018, and 2019, the PPP project contracts relating to the ecological environment and environmental protection, water resources and water services, etc. and non-PPP projects with progress payments were not less than 6 billion yuan, 7 billion yuan, and 8 billion yuan respectively. Considering the latest Shandong Zhaoyuan project, which won the bid, Starview Ecology announced that the contract in hand (excluding the framework agreement) has reached 3.8 billion yuan. There is still an order of 2.25 billion yuan until the completion of the 6 billion yuan contract in 2017. According to the contract of 1 billion to 1.2 billion yuan/unit, it is still necessary to win 2 contracts in the second half of the year. If the framework agreement in the second half of the year is implemented smoothly and the bid winning progress is normal, then the amount of new contracts signed throughout the year is expected to meet or even exceed the promised target. In addition, in addition to Starview Ecology, the company also has other teams that are vigorously developing the ecological PPP project market, and are expected to contribute new orders in the future. The company's overall PPP orders have great potential for subsequent growth. (1) New orders for new photovoltaic energy and grid-connected power generation Recently, Dongxu Blue Sky's photovoltaic power generation business has made some progress, including new orders and grid-connected power generation. Recently added orders mainly include: the Qinggang County distributed photovoltaic poverty alleviation construction project, the Pingyi County photovoltaic poverty alleviation power plant construction project, and the Junxin Photovoltaic Yuguang Complementary Photovoltaic Power Generation EPC Project. The signing of new orders and the completion and integration of existing projects into the grid will be a strong foundation for the company's photovoltaic business revenue and profit growth. In the future, the company will also develop the business of smart energy and optimal management of customer energy, expand business areas in various fields, and become a comprehensive service provider for new energy. (2) Acquisition+capital increase, obtaining 51% of Anxuan Technology's shares to enhance the company's intelligent management capabilities for photovoltaic power generation. In June 2017, Dongxu New Energy Investment, a wholly-owned subsidiary of Dongxu Blue Sky, signed the “Equity Transfer and Capital Increase Cooperation Agreement on Shanghai Anxuan Automation Technology Co., Ltd.” with Wang Jun, Shi Hongxin, Yang Yan, Dong Zhiguo, and Wang Qingyan. Dongxu New Energy plans to acquire 51% of Shanghai Anxuan Automation Technology Co., Ltd.'s shares in Shanghai Anxuan Automation Technology Co., Ltd. for 18 million yuan through the acquisition of some shares and capital increases with its own capital. Among them, Dongxu New Energy first transferred 46.45% of Anxuan Technology's shares for 15 million yuan, that is, 21.15% of the target company held by Wang Jun; 9.95% of the target company held by Yang Yan; 3.96% of the target company held by Dong Zhiguo; 6.44% of the target company held by Shi Hongxin; and 4.96% of the shares in the target company held by Wang Qingyan. Then, Dongxu New Energy will increase Anxuan Technology's capital by RMB 3 million. After the share acquisition and capital increase are completed, Dongxu will hold 51% of Anxuan Technology's shares. Anxuan Technology has strong technical capabilities in intelligent management, operation and maintenance of power plants, which can improve the intelligent management capabilities of Dongxu's blue sky photovoltaic business and help Dongxu explore the subsequent smart energy sector market. (3) Acquire 100% of the shares of Huizhou Lixintong Industrial Co., Ltd. to enhance land reserves in the Guangdong-Hong Kong-Macao Greater Bay Area Dongxu Blue Sky's wholly-owned subsidiary plans to sign an agreement with Huizhou Bioshigun Investment Co., Ltd. to transfer 100% of the shares of Huizhou Lixintong Industrial Co., Ltd. held by Huizhou Lixintong Industrial Co., Ltd. in order to obtain property projects located in Zhongshan and Huizhou. 　　The transaction consideration was RMB 667 million. This transaction will help Dongxu Blue Sky increase its land reserves in the Guangdong-Hong Kong-Macao Greater Bay Area, thereby improving the future performance of the company's location sector. The 400 million employee stock ownership plan was released. The interests of employees are highly tied to the interests of the company, and the ability to act is strong. (1) Announcement and progress of the employee stock ownership plan On August 8, 2017, the 40th board meeting of the 8th Dongxu Blue Sky approved the employee stock ownership plan. On August 21, 2017, Dongxu Blue Sky's 2017 Fourth Extraordinary General Meeting of Shareholders will review this plan. (2) Plan Overview This employee stock ownership plan is the first equity incentive plan launched by Dongxu Blue Sky after the listing of Baoan Real Estate. The scale of capital raised: The maximum amount of capital raised by this employee stock ownership plan is 316.67 million yuan. The funds for employees participating in this employee stock ownership plan come from legal remuneration and self-financing funds obtained through other means permitted by laws and regulations. The company does not provide any financial support to employees or guarantee their loans. Total size+leverage ratio: After the employee's shareholding plan is established, it will entrust management to CNOOC Trust Co., Ltd. and fully subscribe to the general share of the pooled fund trust plan established by the employee. The pooled fund trust plan has an upper limit of 95 million shares, and each share is 1 yuan. Priority shares and general share stock acquisition methods and purchase time are set according to a leverage ratio of no more than 2:1: Dongxu Blue Sky shares are obtained and held mainly through secondary market purchases (including bulk transactions and auction transactions) and other methods permitted by laws and regulations. Within 6 months after the employee's shareholding plan is reviewed and approved by the company's shareholders' meeting, the pooled fund trust plan will complete the purchase of the underlying shares through methods permitted by laws and regulations such as secondary market purchases. Group underwriting: When the pooled fund trust plan is terminated or liquidated, if the expected annualized income of the priority share of the trust plan cannot be realized or there is a loss of principal, Dongxu Group Co., Ltd., the controlling shareholder of the company, will make up for the difference as a financial compensation party. The maximum financial compensation limit is the principal and expected income of the priority share, and bears irrevocable compensation liability for this. Life+lock-up period: The employee's shareholding plan lasts for 24 months. Starting from the date the shareholders' meeting reviews and approves the plan and the pooled fund trust plan is established, the plan terminates on its own if not extended at the end of the term. The lockdown period for this plan is 12 months. Two months before the expiration of the current employee stock ownership plan, the duration of this shareholding plan may be extended after at least 2/3 of the shares held by the holders attending the holders' meeting are approved and submitted to the company's board of directors for review and approval. Subsequent employee stock ownership plan restrictions: After the employee's stock ownership plan purchase is completed, the cumulative number of underlying shares held by the employee stock ownership plan during the entire validity period of the company shall not exceed 10% of the company's total share capital, and the number of underlying shares corresponding to the employee stock ownership plan share held by any holder shall not exceed 1% of the company's total share capital. (3) The list and scope of incentives are based on the draft employee stock ownership plan. The range of participants in this phase of the employee stock ownership plan includes a total of no more than 1,500 directors, supervisors, senior managers and employees of Dongxu Blue Sky and its subsidiaries, including a total of 11 company directors, supervisors, and senior managers. (4) Comment: The amount of incentives and personnel is high, and I am confident in the future development of the company. The total size of this employee shareholding plan is 950 million yuan. Based on the company's closing price of 13.63 yuan/share on August 18, 2017, the total number of corresponding shares is about 696.99 million shares, accounting for about 5.21% of the company's total share capital of 1,337 billion shares. However, the target of this incentive includes Dongxu Blue Sky and its subordinate executives and employees. The total number does not exceed 1,500 people. This incentive, both in terms of overall scale and number of incentives, is at a high level among peers.Moreover, in 2016, the company told the company that it had just been less than 2 years and introduced this plan at the beginning of the development period. Obviously, it is also full of confidence in the company's future performance and stock price. 5. Profit forecast and investment recommendations Judging from the company's recent business progress, the company's strategic layout has become increasingly clear, and the synergistic effects of green per capita, green energy, and green environment will gradually become apparent in the future. Looking at the short term, on the one hand, the company's environmental protection business has been stepped up, and the PPP project has recently gained a lot. The early framework agreement has also begun to be gradually implemented into winning orders. At the same time, the company's extended expansion continues to gain strength, and mergers and acquisitions enter the hazardous waste treatment business; on the other hand, the company's original photovoltaic and real estate businesses also continue to advance. Overall, the business has blossomed and expanded vigorously into the field of environmental protection. Collaborative changes in business layout have also contributed to rapid growth in the company's performance. In the first half of 2017, the company achieved rapid growth of more than 50%, but from the second half of 2017, with the gradual increase in the profit contribution of the environmental protection business, the annual performance growth rate will be even higher. Assuming that Starview Ecology has signed new environmental PPP (and non-PPP) contracts from 2017 to 2019, the estimated amount is 60, 7, and 8 billion yuan respectively. At the same time, the company's other ecological and environmental protection teams are also working hard to obtain new orders. The total amount of newly signed environmental PPP contracts is assumed to be 8 billion yuan, 10 billion yuan, and 12 billion yuan; in terms of traditional business, the scale of photovoltaic power plants connected to the grid in 2017-2019 is 500 MW, 1000 MW, and 1200 MW, respectively. Other business development is steady. According to this estimate, we expect the company to achieve attributable net profit of 4.1 million yuan, 980 million yuan, and 1.9 billion yuan respectively in 2017-2019, with a compound performance growth rate of more than 100% for the next three years. Considering that the company has now entered the fast track of development, the increase in orders and business growth will gradually be realized, and after the synergy between the three sectors has shown, future growth potential is greater. Given the high growth of the company's performance, it is given a “Highly Recommended - A” rating. 6. Risk warning: Construction, grid connection, and settlement progress fell short of expectations, PV subsidies were lowered, and the environmental protection market expansion fell short of expectations.