Event description The company released its 2018 annual report. In 2018, the company achieved operating income of 1,780 billion yuan, an increase of 38.55% over the previous year, net profit attributable to shareholders of listed companies of 100 million yuan, an increase of 4.99% over the previous year, and net profit after deducting non-recurring profit and loss of 94 million yuan, an increase of 22.99% over the previous year. Incident review Irrigation engineering/design revenue increased significantly. During the reporting period, the company achieved construction revenue of 1.156 billion yuan for water-saving projects, an increase of 62.03% over the previous year; realized water saving project design revenue of 287 million yuan, an increase of 165.55% over the previous year; revenue related to both irrigation projects achieved significant growth. In 2018, the company achieved sales revenue of 329 million yuan of water-saving products, a year-on-year decrease of 26.78%. The company achieved a total revenue of 1,772 billion yuan in sales/engineering/design of water-saving products, a record high since listing, with a year-on-year increase of 39.42%. Affected by the settlement progress of engineering business, the company's revenue in the fourth quarter accounted for more than 40% of the year; in the fourth quarter of 2018, the company achieved operating income of 806 million yuan, an increase of 48.98% over the previous year and an increase of 324.21% over the previous year. The overall gross margin has increased slightly, and the financial expense ratio has increased. During the reporting period, the company's overall gross margin was 28.46%, up 2.1pct year on year. By product, the water-saving product sales business achieved a gross profit margin of 50.30%, a year-on-year increase of 18.52pct, the water-saving engineering construction business achieved a gross profit margin of 24.21%, a year-on-year increase of 5.04pct, and the water-saving engineering design revenue achieved a gross profit margin of 20.17%, a year-on-year decrease of 21.72pct. However, water-saving engineering design revenue accounted for 16.21% of the revenue for the full year of 2018, lower than the ratio of product sales and construction 18.49% and 64.94%. Overall, the company's gross margin increased. Judging from the three fees, the company's management expense ratio was relatively stable in 2018, at 8.76%, up only 0.66pct year on year; the sales expense ratio fell 1.73 pct year on year to 3.88%; and the financial expense ratio fluctuated greatly, up 1.65 pct to 3.60% from 2017. The share of accounts receivable has declined markedly, and operating cash flow has improved markedly. Affected by the country's increased efforts to clear accounts arrears for private enterprises, the company has taken active measures to follow up, and the collection of accounts receivable has improved markedly. By the end of 2018, the company's accounts receivable balance was 625 million yuan, down 29 million yuan from 2017; in 2018, the company's accounts receivable accounted for 35.13% of sales revenue, down 15.76pct from 2017. Meanwhile, in 2018, the company's net operating cash flow was 798 million yuan, the first correction since 2016. On the one hand, the high-quality PPP projects built by the company in the early stages contributed more to cash flow; on the other hand, the company's accounts receivable repayment situation improved, which had a positive effect on improving cash flow. New orders have increased dramatically, and rural revitalization has boosted the prosperity of the industry. In 2018, the company signed a new order of 4.5 billion yuan, an increase of 52% over the previous year. As of the end of the reporting period, the company had orders in hand of about 3.2 billion yuan. In the first quarter of 2019, the consortium participating in the company won the bid for the PPP project for the township environmental protection upgrading project in Suzhou District of Jiuquan City, with an estimated total investment of 155 million yuan. In 2018, on the basis of consolidating traditional irrigation saving business, the company added rural sewage treatment business, which is highly compatible with the rural revitalization strategy. As the rural revitalization strategy continues to advance, orders in fields such as water-saving irrigation and rural ecological environment remediation are expected to be released at an accelerated pace, bringing more room for growth to the company. The investment suggests that the company start from traditional irrigation saving business and expand into related business areas such as rural sewage treatment and safe drinking water for farmers, and extend the agricultural service industry chain. Since 2017, the scale of new orders has maintained a rapid upward trend, and cash flow has improved. As the rural revitalization strategy continues to advance, the company is expected to use policy trends to achieve rapid development. We expect the company's EPS for 19-21 to be 0.21\ 0.36\ 0.50, respectively, and the corresponding company's closing price on April 17 is 8.07 yuan, and the 19-21 PE is 38.05\ 22.46\ 16.10 respectively, covering the first time, giving it an “increased holding” rating. Risk warning policy progress falls short of expectations; project progress falls short of expectations; profit margins decline; debt and financing risks; systemic risks.