Core view: The company plans to acquire 55% of Zhongxu Construction's shares at a price of 369 million yuan in cash. It is expected to increase performance. The company recently announced a major asset purchase plan to acquire 55% of Zhongxu Construction's shares in cash at a price of 369 million yuan, divided into four cash payments (the last 3 for 2018-2020), 40% of the initial payment (10 working days after completion of delivery), or 147.6 million yuan, and 20% per year for the next 3 years. Zhongxu Construction's 2018-2020 performance promise is that the lower value of net profit due to mother before and after deducting non-recurring profit and loss is not less than 8,000, 9600, and 115.2 million yuan, respectively, which is expected to strongly enhance the company's performance. Zhongxu Construction Project has complete construction qualifications and rich experience. To help promote comprehensive ecological environment management, Zhongxu Construction has a total of 4 general contracting qualifications and 7 professional contracting qualifications. Among them, municipal construction has first-class general contracting qualifications, and is a local construction enterprise with strong influence in the Bengbu region of Anhui Province. In recent years, the company has successively acquired 100% of Dongsheng Environmental's shares and 100% of Ande Technology's shares, forming a business system based on “production and sale of water treatment agents+construction and operation of water treatment engineers+sales of environmental protection equipment”. The acquisition of Zhongxu Construction will further help the company promote the construction of a large environmental protection platform and strengthen the construction of PPP projects. According to the announcement, Zhongxu Construction won the bid before September 2017 but has not yet started construction, and the total number of projects that have won bids or signed agreements since September 2017 is about 1.3 billion yuan. Dongsheng completed a profit of 17.73 million yuan in the first half of the year. In August of this year, the company completed the acquisition of 100% of Dongsheng Environmental's shares for 495 million yuan. Dongsheng Environmental's performance commitment for 2016-2018 was 0.35/0.56/ 67 million yuan, respectively. Since then, the company has increased its capital twice to a total of 250 million yuan, speeding up the project implementation process. In the first half of 2017, Dongsheng Environmental achieved revenue of 61.91 million yuan, corresponding net profit of 17.73 million yuan, and steady execution of on-hand orders. In the middle of this year, the company acquired the remaining 49% of Ande Technology's shares and achieved wholly-owned ownership. Ande Technology's corresponding performance commitment for 2017-2019 was RMB 0.23/0.27/32 million yuan. The extension of the industrial chain enhances overall competitiveness, and maintains a “buy” rating without considering the acquisition of Zhongxu Construction. We expect the company's EPS in 2017-2019 to be 0.452, 0.524, and 0.579 yuan/share, respectively, and the corresponding PE corresponding to the latest closing price will be 40, 34, and 31 times, respectively. In recent years, the company has accelerated mergers and acquisitions, acquired Tongsheng Environmental Layout Sewage Project construction, and acquired Ande Technology to further broaden the water treatment agent terminal application market. It now plans to acquire Zhongxu Construction to further enhance the company's comprehensive strength and give it a “buy” rating. The risk indicates that new business development is lower than expected, and the project commissioning schedule is lower than expected.