In 2014, the company began to rapidly expand its "big ecological" layout through endogenous development and a series of mergers and acquisitions. In 2016, through the acquisition of Muhe water-saving to enter the agricultural water-saving industry, at the same time the establishment of Beijing blue ecology, in the wisdom of water-saving gradually grow into the industry leader. In 2017, it acquired the northern gardens and entered the ecological restoration industry. In September 2018, it was announced that Zhongke Dingshi, the leader of soil remediation, would be acquired, and the layout with intelligent ecology as the core was gradually clear.

Agricultural water-saving benefit policy to maintain a high demeanor, the acquisition of Muhe water-saving to create intelligent water-saving leading enterprises. The 13th five-year Plan makes it clear that by 2020, the area of high-efficiency and water-saving irrigation will reach 369 million, corresponding to an output value of about 142.5 billion yuan from 2018 to 2020. At the same time, the development of the industry will benefit from a series of reforms such as water price, the integration of water and fertilizer and agricultural supply side. The company acquired water-saving faucet Muhe water-saving in 2016, due to the advantages of the whole industry chain business from hardware to software to services, as well as the advantages of policy and business model in financing and rebate of agricultural PPP projects, the orders of Beijing Blue Muhe and Beijing Blue Ecology have increased rapidly in recent years, and new orders are expected to increase by 2 billion yuan in 2018, effectively ensuring income growth.

The potential demand in the field of ecological restoration is huge, the acquisition of Zhongke Dingshi + the full-dimensional layout of northern gardens ecological restoration. The ecological restoration industry has benefited from the continuous promotion of the policy, in which the market space of 2016-2020 in the field of soil remediation alone is more than 200 billion yuan. The company announced in September 2018 that it intends to acquire the controlling shares of Zhongke Ding by means of cash and share issues. if the acquisition is completed, it will hold 77.72% of the shares, and the cumulative net profit from 2018 to 2020 is promised to be no less than 400 million yuan. Zhongkeding has a number of core technologies, rich project experience and strong brand power in the field of environmental remediation, and the merger and acquisition will not only contribute to the effective upgrading of the company's soil remediation plate, but also help the company to exert synergy in the market and business resources, and further improve the layout of comprehensive management of the ecological environment.

In addition, the company completed the acquisition of 90.11% of the shares in Northern Gardens in 2017, and its addition also improved the company's business layout in landscaping, ecological restoration and other fields. at the same time, its location resources, expertise and other aspects can be mutually beneficial and complementary with the company.

Comprehensive clean energy services will be promoted. Energy conservation and emission reduction is also a key area for the development of environmental protection work in recent years. Under the guidance of policies such as the 13th five-year Comprehensive work Plan for Energy Conservation and Emission reduction, the energy-saving service industry has maintained rapid growth. In 2017, the total value of the energy-saving service industry increased by 16.3% to 414.8 billion yuan compared with the same period last year, while there is still room for growth and momentum compared with the target of 600 billion gross output value in 2020 proposed in the 13th five-year Plan.

Profit forecast, valuation and investment rating: smart and water-saving: considering that the water-saving industry is still in a high demeanor, while water-saving irrigation PPP projects are of good quality and are expected to enjoy policy subsidies, the company's water-saving sector has strong comprehensive strength in project acquisition and engineering-hardware-software. As an industry leader, it is expected to continue to maintain rapid development by taking advantage of the high landscape of the industry. Garden and ecological restoration: the company's garden plate continuously won the bid for ecological restoration PPP project in 2018, coupled with the company's strong financing capacity and synergy, there is still a driving force for growth in the future; to acquire China Science and Technology Dingshi: if the acquisition is successful and completed in 2019, the net profit is expected to exceed 100 million yuan that year. Without considering the consolidated table for the time being, we expect the company to achieve operating income of 35.98,52.06 and 6.764 billion yuan from 2018 to 2020, and return net profit of 3.80,4.67,547 million yuan, corresponding to EPS of 0.43,0.53,0.62 yuan per share, corresponding to PE of 14,11,10 times, covering for the first time and giving a "recommended" rating.

Risk hint: the risk of M & An integration: the company's M & An efforts in recent years are relatively strong, the management is more difficult, and the business integration of various sectors is less than expected; the risk of project acquisition and promotion: the improvement of the financing environment is not as expected, resulting in PPP and other projects being affected by the shortage of funds in terms of expansion and promotion; industry competition risk: there is still room for maturity in major business areas, and the risk of intensified competition in the industry will affect market share and profitability in the future.