Main point of view: epitaxial mergers and acquisitions to lay out the water treatment industry chain. The company's traditional main business is the production of filter press equipment. As the sales performance of filter presses slowed down, the company began to transform into the field of environmental protection. In 2014, the company acquired Zhejiang Dredging and Zhejiang Shuimei respectively to enter the fields of water conservancy engineering and sewage treatment. In 2016, the company acquired Hangzhou Zhongyi Ecology and entered the field of ecological restoration. After the acquisition and merger of the company, the company's performance increased significantly. The subject matter of the acquisition exceeded performance promises. In 2014-2015, Zhejiang Dredging and Zhejiang Shuimei both exceeded their performance promises. From February to June 2016, China Art Ecology achieved net profit of 93.68 million yuan, exceeding last year's full-year performance promise. The acquisition target's excess performance promise reflects the company's strong ability to integrate. Ten billion orders and framework agreements are in hand, and there are many warehousing projects. At present, the amount of orders and framework agreements signed by the company has reached 11.549 billion yuan, of which the total investment amount of projects entering the PPP project bank of the Ministry of Finance and the Development and Reform Commission has reached 8.631 billion yuan. Sufficient orders and framework agreements will guarantee the rapid and steady growth of the company's performance in the next few years. Set up a 3 billion yuan environmental protection industry merger and acquisition fund to explore excellent targets in the field of solid waste treatment. In August 2016, the company participated in the establishment of a 3 billion environmental protection industry fund, which mainly invests in the field of solid waste treatment. In the future, we may explore high-quality assets in the field of solid waste treatment and inject them into the company to expand the layout of the company's environmental protection industry. Investment advice: The company's main business revenue for 2016 to 2018 is estimated to be RMB 2,068 billion, RMB 2,738 million and RMB 3.367 billion, with net profit of RMB 239 million, RMB 329 million and RMB 421 million respectively, and EPS of 0.47 yuan/share, 0.65 yuan/share and 0.83 yuan/share. Through epitaxial mergers and acquisitions over the past three years, Xingyuan Environment has gradually become a powerful comprehensive environmental management service provider. We are optimistic about the company's ability to integrate its business and take orders in the PPP model. First time following, given a buy rating. Risk warning: Risk of a decline in the company's gross margin due to increased market competition; operating capital risk due to untimely payment of accounts receivable; management risk caused by mergers and acquisitions of subsidiaries.