Key investment points: A pioneer in the water treatment industry, building a complete industrial chain and core competitiveness The company is a pioneer in the water treatment industry in China. It has been focusing on the environmentally friendly water industry since its establishment for more than 30 years. Currently, it has a complete industry chain including product R&D, consulting and design, engineering contracting, investment and operation management, and production and marketing of environmental protection equipment. The company focuses on developing large and medium-sized water investment and operation projects. Currently, it has 21 investment and operation projects (including 5 under construction) across the country, including 1.05 million tons/day of sewage treatment and 555,000 tons/day of water supply. Due to the advantages of the company's complete industrial chain and the large scale of investment and operation of individual projects (generally above 50,000 tons/day), plus years of rich experience and good management, the company's cost control ability is outstanding. The average water treatment cost is less than 0.6 yuan/ton, which is lower than the national average, demonstrating the company's core competitiveness, and the brand advantage is obvious. Continuously consolidating traditional water services businesses and actively developing new businesses to lay the future growth. In 2017, the company won bids for sewage treatment projects such as Qiyang, Yuanjiang, Zhoukou Shanan Phase III, Shaerqin, Changchun Southeast Plant, and Danbei Houxiang. The order amount was 1,088 billion yuan, an increase over last year. According to the “13th Five-Year Plan” National Urban Sewage Treatment and Recycling Facility Construction Plan, the market space for urban sewage treatment and recycling facility construction during the 13th Five-Year Plan period was about 564.4 billion yuan. After listing, the company is expected to fully benefit from industry growth through its brand advantages and financing advantages, and the traditional water business will continue to be consolidated. At the same time, the company is also actively developing emerging businesses such as solid waste and ecology, using the treatment of agricultural organic solid waste such as straw, livestock and poultry manure as the main development direction, and joined forces with Nanjing Agricultural University (technical support) and Lianye Technology (equipment and operation experience) to enter the organic solid waste recycling application field. Currently, it has signed organic fertilizer projects with a total annual output of 500,000 tons in Xinjiang (100,000 tons), Nong'an (300,000 tons), and Bozhou (100,000 tons). Currently, environmental protection inspections are getting stricter, and rural surface source pollution control is just beginning Stage, recycling of organic solid waste Taking advantage of the market's potential, the company lays out ahead of schedule to establish future growth. The operating business accounts for a high proportion, abundant cash flow+low balance ratio, and the sewage treatment and water supply business, which is poised to expand, is a good operating asset. Of the company's 2015-2017 revenue, investment and operation business accounted for 51.51%/51.32%/51.53%, respectively, and the gross profit ratio was 71.05%/68.65%/66.00%, respectively. It is one of the few listed companies that operate water services. Excluding cash from BOT/BT project investments, the company's net cash flow from operating activities in 2015-2017 was RMB6.53/782 million yuan respectively, and its ability to generate cash flow is strong. 2018Q1 has a monetary capital of 608 million yuan and a balance ratio of only 35.67%. It is at a low level in the industry, and there is plenty of room for improvement in financing. The company has strong ability to create cash flow+abundant capital+low balance ratio, which helps the company expand. Profit forecasting and investment ratings: The first coverage gave the company an “gain” rating. The company's 2018-2020 EPS is expected to be 0.49, 0.58, and 0.65 yuan respectively, corresponding to the current share price PE of 42, 35, and 32 times. The company is a newly listed sub-IPO, and the valuation is a bit high, but we are optimistic about the development prospects of the organic solid waste industry, so we give the company an “increase in weight” rating. Risk warning: risk of project acquisition and progress falling short of expectations; risk of a sharp increase in accounts receivable; risk of organic solid waste recycling projects progressing slowly; risk of falling short of expectations in organic fertilizer prices and sales; and macroeconomic downside risks.