Incident: On the evening of August 23, the company released its 2019 semi-annual report: in the first half of the year, the company achieved revenue of 440 million yuan, a year-on-year decrease of 18%, achieved net profit attributable to shareholders of listed companies of 45.3696 million yuan, a year-on-year decrease of 21.93%, and realized net profit after deduction of 446.573 million yuan, a year-on-year decrease of 18.76%. Our comments on this are as follows: Investment highlights: The industry's operating business grew rapidly in the cold winter. The engineering business actively shrank revenue of 440 million yuan, a year-on-year decrease of 18%, achieved net profit attributable to shareholders of listed companies of 45.3696 million yuan, a year-on-year decrease of 21.93%, and realized net profit after deduction of 446.573 million yuan, a year-on-year decrease of 18.76%. The reason for the decline in performance was mainly affected by PPP project clearance and environmental protection industry financing environment. The company reviewed the situation, focused on risk, invested carefully, and actively reduced some risks The engineering business (environmental infrastructure manufacturing business) experienced a certain decline, but the operating business grew significantly. In the first half of the year, the sewage treatment volume was 152 million tons, up 72.11% year on year, and sewage operating revenue was 268 million yuan, up 204.41% year on year. The company's net cash flow from operating activities was 42.6589 million yuan, a significant correction from -102 million yuan in the same period last year. The marked improvement in cash flow was mainly due to the selection of high-quality projects and the strengthening of accounts receivable management. In terms of period expenses: The company's sales expenses ratio was 2.13%, up 0.52 pct year on year, which was basically the same; the management (including R&D) cost ratio was 13.80%, up 7.07pct year on year, mainly due to increased R&D investment and increased labor costs for the establishment of two new branches in Anhui and Shaanxi; the financial expenses ratio was 5.32%, up 2.95 pct year on year, mainly due to the increase in loans as the company's projects increased. Actively reserving technology+expanding the regional layout is ready to go. There are sufficient orders to support business growth in the cold winter of the industry. On the one hand, the company is selecting projects and investing carefully, and on the other hand, it is also actively reserving technology and regional layout to prepare for future development. The company has mastered technologies such as the “Denitrification Deep Bed Filter Carbon Source Intelligent Precise Dosing System” and “Alkaline Stable Drying Treatment of Sludge”, actively promoted the urban and rural ecological complex model, and undertook the new “Beijing-Tianjin-Hebei Groundwater Pollution Characteristics Identification and System Prevention Research” project to continuously consolidate and improve technology. Adhering to the principle of regionalization, the company established new branches such as Anhui and Shaanxi branches, and gradually began to harvest: the PPP project for the renovation and expansion of the Urumqi Hedong Sewage Treatment Plant and Reclaimed Water Project, which won the bid in August 2019, with a total investment of about 682 million yuan was a breakthrough in the company's large-scale projects in the northwest region. Since 2019, the company has successively signed the Mercedes-Benz project (53.3 million yuan), the Tangyin County agricultural toilet project (amount undecided), the Langfang Guangyang project (89.05 million yuan), the Langfang Guangyang project (124 million yuan), the Urumqi project (682 million yuan), etc. Currently, orders in hand exceed 1.3 billion yuan, with sufficient orders in hand to support the company's future performance growth. Profit forecast and investment rating: Maintain the company's “gain” rating. We are optimistic about the company's development prospects. We expect the company's 2019-2021 EPS to be 0.92, 1.22, and 1.55 yuan respectively, corresponding to the current PE price of 15, 11, and 9 times, maintaining the company's “gain” rating. Risk warning: risk of project expansion and execution falling short of expectations, risk of a sharp increase in accounts receivable, risk of rising interest rates, risk of shareholder holdings reduction, and macroeconomic downside risk.