Incident: The company announced the signing of a letter of intent to cooperate for domestic waste power generation projects in Thailand. The company will jointly build and operate 5 domestic waste incineration plants with 5 local Thai companies, totaling 2,200 tons/day. Wanbangda shares 80% of the joint venture. Key investment points: The Thai project is nearly double the domestic electricity price, and high-calorific waste brings high profits to the company. Thailand has a total of 5 projects, 4 500 tons/day, and 1 200 tons/day. The feed-in price is equivalent to RMB 1.12 yuan/kilowatt hour, which is much higher than the domestic price of 0.65 yuan/kilowatt hour. Moreover, domestic waste in Thailand is mostly fallen leaves and branches, etc., and has a high calorific value. According to the 9.9 megawatt unit signed in the letter of intent, the annual power generation time is 6,000 hours, and the garbage disposal cost is 75 yuan per ton. The revenue for a single project is 75 million yuan, and the net profit is 35 million yuan. The total net profit of the five projects contributed more than 150 million. The company accounted for 80%, and a net profit of 120 million yuan can be confirmed. Based on the 10-12 month construction period for each project, all can be put into operation by the end of 2019. The license is of high quality, and production capacity is expected to increase. Beijing Shenghua's 42 comprehensive waste disposal licenses cover the whole of Heilongjiang Province. The province's annual hazardous waste production will reach 1.04 million tons by 2020. The project is to be built in two phases. The first phase is under construction. The annual comprehensive treatment scale of hazardous waste is about 83,900 tons. It is expected to be completed and put into operation in May '19. According to the company's estimates, the net profit of the hazardous waste project after delivery is estimated to reach 70.99 million yuan/year. The company's wholly-owned subsidiary Jilin solid waste license qualifications: 80,000 tons of physico-chemical treatment, 10,000 tons of incineration (including medical waste), and 110,000 tons of landfill. At the same time, the largest hazardous waste landfill in the three northeastern provinces (the only hazardous waste landfill in Jilin Province) is under construction, with a storage capacity of 1.4 million square meters, which is extremely scarce, and the scope of hazardous waste collection and transportation is as far as Jiangzhe. Hazardous waste charges are high, and licenses are scarce. Considering the commissioning of the second phase of solid waste in Jilin, we expect hazardous waste treatment performance to double in '18. Furthermore, the company acquired 51% of Taihu Petroleum's shares in 2016, laid out markets such as oil-based drilling chips and sludge disposal in advance, and will cooperate deeply with the company's petrochemical resources. In the year-end assessment of key cities in the country for the management of black and smelly rivers, the company layout had a clear first-mover advantage. The “Water Pollution Prevention and Control Action Plan” proposes that “municipalities directly under the Central Government, provincial capitals, and built-up areas of separate municipalities should basically eliminate black and smelly water bodies by the end of 2017.” According to estimates of a single black and smelly river with a unit investment of 35 million/km, 205 black and smelly water bodies were basically completed in 2017 under key listing supervision, corresponding to a single investment space of nearly 20 billion dollars in 2017, and a national market space of about 100 billion dollars at the end of 2020. Through acquisitions, the company surpassed science and innovation into the treatment of black and smelly rivers. It has core technology such as biological enzyme treatment, efficient flocculation technology, and rapid sediment dredging and drying technology. Combined with microbial enzyme technology, it can treat large-scale rivers with systematic mud and water treatment. Demonstration projects for the treatment of black and smelly rivers have now been carried out in Shanghai, Changshu, Hangzhou, etc., with remarkable results. We expect the company to greatly benefit from the upcoming Black and Smelly River assessment and stricter regulations. The waste acid disposal business has been launched, the market space is sufficient, and the performance has increased significantly. Waste acid treatment is just what is 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 calculation of 20 million tons of hydrochloric acid from metal processing and pickling waste per year in the country, 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, it corresponds to an investment requirement of 10 billion dollars and an operating space of 10 billion yuan/year. There are 9 major scrap processing bases across the country, with a scrap production capacity of more than 3,000 tons/day, which is expected to release demand as a priority. The company's resource technology is in line with environmental protection trends. In the first three years after the first phase of production, the annual net profit was 13.4821 million, and the performance increased significantly. It holds the leading petrochemical tailings market and was put into operation at the end of 2017, which is a growth point for future performance. After the first phase of Huizhou Equus's project was completed at the end of November '17, it will become the largest C5 separation project in the country (with an annual processing capacity of 300,000 tons of raw materials). C5 raw materials are scarce. According to estimates, the total amount of C5 raw materials in the country is no more than 1.8 million tons, with the 300,000 tons of ICOS Phase I accounting for 17%, making it the largest comprehensive utilization project in Asia. Furthermore, after the completion of the second phase of IKOS, C5/C9 deep processing capabilities will be formed. The main products are high-end resins such as DCPD hydrogenated resin and carbon 9 hydrogenated resin, which are widely used. The company increased its capital in 2016 by 45% of Huizhou Equus Holdings to become the largest shareholder. It is expected that the commissioning of the project will greatly increase the company's profit level. Profit forecast and investment advice: Based on the progress of the project, we maintained our net profit forecast for 17-18 and raised our net profit forecast for 2019 to 4.14, 6.99, and 1.083 billion (originally $1,024 million in '19), corresponding to PE 43 times and 25 times for '17 and '18. The inflection point in the company's performance is quite obvious, and we maintain a “buy” rating.