Qingshuiyuan, the only water treatment pharmaceutical company in the A-share market, was founded in 1995 and entered the capital market in 2015. It specializes in the production and sale of water treatment chemicals. It is currently the only listed company in the water treatment pharmaceutical industry in the A-share market, and has a significant market share in the domestic and international markets. Water treatment agents are divided into single agents and compound products. Clean water source products are mainly single agents, which can be used as corrosion inhibitors, scale inhibitors, etc., and are widely used in the field of industrial water treatment. After going public, the company made up for the shortcomings in pharmaceutical compounding through the acquisition of Ande Technology, and has become a water treatment pharmaceutical company providing single-agent production+compounding technology services. The company's three-year epitaxial mergers and acquisitions, and the layout of the entire industry chain was affected by increased competition in the industry, and the company's main business revenue and net profit growth slowed. In 2016-2017, the company completed three major epitaxial mergers and acquisitions and extended the industrial chain. In 2016, the company acquired 100% of Tongsheng Environmental's shares and entered the municipal and industrial water treatment operation business; in 2017, the company successively acquired 51% and 49% shares of Shaanxi Ande Technology, expanding into water treatment agent blending products and terminal services, while successfully entering the Shaanxi market; at the end of 2017, the company acquired 55% of Anhui Zhongxu Environmental Construction's shares, obtained engineering construction qualifications, and moved towards the field of comprehensive water environment construction management. The acquisition plan of the company, Ande Technology, and Zhongxu Environment uses instalment cash payments on the premise that performance is completed in the subsequent cash payment process. We expect the consolidated profits of the three mergers and acquisitions projects in 2018-2020 to be $138 million, $165 million, and $196 million, respectively, with cash payments of $113 million, $74 million, and $74 million. The time difference between profit consolidation and cash payments guarantees the growth of the company's deferred mergers and acquisitions, while reducing corporate debt ratios and financial costs to a certain extent. The company's development advantages and future markets The company's main products and by-products have all benefited from rising prices under environmental regulations, water treatment chemicals and some by-products. Prices have been running at a high level since the fourth quarter of last year. Supply-side reforms will continue to be implemented in depth, the competitive landscape of the industry is also changing, and the relationship between supply and demand for water treatment chemicals will maintain a tightening trend. Pharmaceutical production is the foundation of the company's business and also provides the company with stable cash flow. In the future, the company will enter the municipal and industrial water treatment markets based on the industrial chain layout. We are particularly optimistic about the company's development in the industrial water treatment market. Profit forecast and investment advice The company's current stock price is lower than the 2016 issue price. PE-TTM and PB are both at a low level. The company is expected to achieve net profit of 258 million and 348 million in 2018-2019, corresponding to 15 or 11 times the current stock price. The undervaluation is highly flexible, giving it a “highly recommended” rating. Risk warning: Market competition risk, the performance promise of the acquisition target falls short of expectations