The strategic acquisition of Jiangsu Kangbo has entered the field of hazardous waste disposal: In December 2017, the company plans to acquire Jiangsu Kangbo Industrial Solid Waste Company from Yongqing Group and Hangxiang Honghu by issuing shares for 1.07 billion yuan. The acquirer promised to deduct non-net profit of 106 million yuan, 105 million yuan and 113 million yuan in 17-19 years, with an average net profit of 108 million yuan over three years, equivalent to 76% of the company's net profit in 2016. Kangbo Industrial Waste has 4 hazardous waste incineration and disposal production lines, with a total scale of 38,000 tons, which can dispose of 17 categories of hazardous waste. It is the largest single hazardous waste harmless disposal project in Jiangsu. The project ton hazardous waste disposal cost exceeds 6,000 yuan, far exceeding the national average disposal fee level. After the acquisition of Kangbo, the company entered the booming hazardous waste field, and used this as a breakthrough to seize the Jiangsu and Zhejiang market, which had a large gap between supply and demand. At the same time, it relied on Kangbo's brand, team and technology to further expand the hazardous waste business and create a new performance growth pole for the company. Increase market and technology investment, and maintain a leading position in the industry in soil remediation: The company increased the construction of a first-line soil team in 2016, and also established a soil research institute in Shanghai to strengthen technology research and development. In 17 years, it has successively received key projects such as the Gansu Baiyin Heavy Metals Treatment Project of 10.46 million yuan, the Wuhan Intelligent Manufacturing Park site restoration project, Hengyang, Hunan (0.3 billion yuan), and Suzhou, Jiangsu (0.27 million). New orders are expected to be signed throughout the year, which is equivalent to 4.3 times the 16-year revenue of this business. We believe that the combined effects of the company's soil remediation on teams, technology, and channels are beginning to work, and we are expected to be the first to benefit as market demand increases. Demand for soil pollution control is expected to increase in 2018, and the company is expected to benefit from the explosion of the industry. The second review of the “Soil Pollution Prevention and Control Law” (draft for comments) has been announced. It is expected that it will be officially introduced at the 18th meeting. The investment and financing model and technical standards that are plaguing the development of the industry are expected to be clarified; the construction of a national soil environmental quality control and monitoring network is nearing completion. The company is deeply involved in Hunan and quickly expanded into markets such as Central China, Jiangsu, Zhejiang, Shanghai, Northwest China, Beijing-Tianjin-Hebei, etc., to achieve a national layout. Maintaining the “buy” rating: Considering the decline in the company's atmospheric management, and if the acquisition is successful, the 18-19 hazardous waste business is combined. The net profit forecast for '17 was lowered by 29% to $154 million, and the net profit forecast for 18-19 was raised by 31.7% and 24.3% to 378 million yuan and $516 million, corresponding EPS was 0.24, 0.50, and 0.68 yuan (the issuance of 107 million new shares was diluted in 18-19). Referring to the valuation level of comparable companies and considering the future boom in hazardous waste and soil restoration, the company was given 30 times PE in 18 years (the average PE of comparable companies in 18 years is 22 times), and the corresponding target price is 15 yuan, maintaining a “buy” rating. Risk warning: Subsequent development progress of hazardous waste fell short of expectations, and soil remediation orders fell short of expectations.