Key investment points: The company is the country's leading environmental protection enterprise in energy saving and emission reduction and comprehensive utilization of water resources. The company is mainly engaged in comprehensive, full-life cycle professional services for industrial water treatment systems, and overall coordination of the operation of water supply, drainage, reclaimed water reuse and water treatment systems. Benefiting from the development of the coal chemical and petrochemical wastewater treatment industries and its own competitiveness, the company's revenue bottomed out and rebounded in 2017, and net profit increased by 45.65% year-on-year. Changes in management are expected to bring about positive changes in performance. The company appointed Gao Chunshan as the company's general manager. He is a professor-level senior engineer. From July 1987 to January 2016, he worked for CNPC Fushun Petrochemical Company, Dalian Petrochemical Company, and China Energy Conservation Capital Holdings Co., Ltd. Petroleum and petrochemical is an important downstream customer of the company. Rich petroleum and petrochemical industry experience and professional engineer qualifications help the company develop its business. The waste acid disposal business has been launched, there is sufficient market space, and performance has increased significantly. Waste acid treatment is just needed, and the total amount needs to be treated is huge. According to statistics from the China Chemical Information Center, China produces more than 100 million tons of various industrial waste acids every year. According to the country's annual calculation of 20 million tons of waste hydrochloric acid from metal processing and pickling, the current 3,000 tons/day treatment project corresponds to an investment of 400 million yuan. Assuming an average unit price of 500 yuan/ton, the corresponding investment demand is 10 billion yuan, and the operating space is 10 billion yuan/year. There are 9 major scrap processing bases in the country, with a scrap production capacity of more than 3,000 tons/day, which is expected to release demand on a priority basis. The company's resource technology is in line with environmental trends. In the first three years after the first phase was put into operation, the annual net profit was 13.4821 million, and the performance increased significantly. The Jilin Hazardous Waste Company is a leading regional monopoly, and the scope of treatment extends far beyond Jiangzhe. Jilin Solid Waste is a wholly-owned subsidiary of the company. License qualifications: 80,000 tons of physical chemicals, 10,000 tons of incineration (including medical waste), and 110,000 tons of landfill. Jilin Solid Waste is under construction of the largest hazardous waste landfill in the three northeast provinces (the only hazardous waste landfill in Jilin Province), with a storage capacity of 1.4 million square meters. It is extremely scarce, and the scope of hazardous waste collection and transportation is as far as Jiangzhe. Currently, hazardous waste treatment costs remain high, and the company expects the hazardous waste treatment performance to double in 2017. In addition, the company successfully acquired 51% of Taihu Petroleum's shares in 2016, which is expected to take advantage of the company's project advantages in the petrochemical field to lay out markets such as oil-based drilling chips and sludge disposal ahead of schedule. In the assessment of key cities in the country for the management of black and smelly rivers at the end of '17, the company's active layout and first-mover advantage was obvious. The “Water Pollution Prevention and Control Action Plan” proposes that “municipalities directly under the Central Government, provincial capitals, and built-up areas of planned separate cities should basically eliminate black and smelly water bodies by the end of 2017.” According to estimates of a single black and smelly river length of 3 kilometers and a unit investment of 35 million/km, 205 black and smelly water bodies were basically completed in 2017 under key listing supervision, corresponding to an annual investment space of nearly 20 billion yuan in 2017, and a national market space of about 100 billion dollars at the end of 2020. Through acquisitions, the company transcends science and innovation into the management of black and smelly rivers. It has core technologies such as biological enzyme treatment, high-efficiency flocculation technology, and rapid sediment dredging and drying technology. Combined with microbial enzyme technology, it can carry out systematic mud management for large-scale rivers. Currently, demonstration projects for the treatment of black and smelly rivers have been carried out in Shanghai, Changshu, Hangzhou, etc., with remarkable results. We expect the company to benefit greatly from the proximity of the Black and Smelly River Assessment and the tightening of regulations. It controls the market leader in petrochemical tailings and was put into operation at the end of 2017, which is a growth point for future performance. After completion of the first phase of Huizhou Ikos's project at the end of November '17, it will become the largest C5 separation project in the country (annual processing capacity of 300,000 tons of raw materials). C5 raw materials are scarce. According to estimates, the total number of C5 raw materials nationwide does not exceed 1.8 million tons, and the 300,000 tons of the first phase of Ikos account for nearly 17%, making it the largest comprehensive utilization project in Asia. Furthermore, after the completion of ICOS Phase II, C5/C9 deep processing capabilities will be formed. The main products are high-end resins such as DCPD hydrogenated resins and carbon-nine hydrogenated resins, which are widely used. The company increased its capital in 2016 by 45% of Huizhou Ikos and became the largest shareholder. It is expected that the commissioning of the project will greatly increase the company's profit level. Upgrading profit forecasts and investment ratings: Combining the 2017 interim report and project progress, we raised the company's net profit in 17-19 to 4.14, 6.99, and 1,024 million yuan (previously 4.03, 5.94, 716 million yuan), corresponding to the PE in '17 and 18, 38 times and 23 times, lower than the industry average of 38 times in '18. The company is rich in technical reserves, high performance explosion certainty, and target space of 30 times in '18, and upgraded to a “buy” rating. Risk warning: The progress of the Huizhou project fell short of expectations.