Small to medium urban sewage and industrial sewage treatment experts. Zhongji Water specializes in urban sewage treatment, industrial sewage treatment, sludge treatment and comprehensive environmental remediation. Customers mainly target small and medium-sized cities and industrial customers. In 2019, the company strictly controlled the quality of projects, reduced ecological engineering projects with large advances, increased such as high-concentration organic wastewater treatment projects, and increased gross margin. In the context of the continuous release of the water market in small and medium-sized cities, the company's profit quality has improved and cash flow has improved. Sewage in small to medium towns: seize the opportunity to repair shortcomings in the 13th Five-Year Plan. The 13th Five-Year Plan period is approaching, and demand for sewage plant construction and upgrading that has not yet completed the target will continue to be released. At the same time, the “Three-Year Action Plan for the Remediation of the Rural Human Settlements Environment” clearly states that by 2020, the rural living environment will improve markedly, and sewage treatment in small and medium-sized cities will usher in opportunities to repair shortcomings. The company focuses on sewage services for small and medium-sized cities, has been deeply involved for many years, and has obvious competitive advantages. ① Rich experience: More than ten years of service experience in small and medium-sized cities enabled the company to understand the water needs of small and medium-sized cities. ② Scale effect: The company is deeply involved in the water markets of Henan and Hebei, closely tracks customer needs, and the acquisition cost of incremental business is low. ③ Team localization, remarkable demonstration effect: The company focuses on regional management, constructs a localized and specialized service team, and drives the acquisition of other businesses within the region through the demonstration effect of the project. Industrial sewage engineering: comprehensive coverage of multiple industries. Under the impetus of environmental protection inspectors, the popularity of industrial sewage treatment has increased. Many provinces and cities have increased centralized pollution control and treatment for enterprise groups in industrial parks, and sewage treatment has also transitioned from point sources to systematic management throughout the park. The company is close to industrial customers in various industries such as automobiles, iron and steel, printing and dyeing sewage treatment, etc., has accumulated rich technology, and completed a large number of milestone projects. The acquisition of Nanzi Environmental Protection in 2018 further enhanced the company's treatment capacity in the field of high-concentration organic wastewater. As of the first half of 2019, the on-going order volume for non-operating projects exceeded 700 million yuan, of which about 40% were industrial projects, which are expected to continue to contribute to the company's performance in the second half of 2019 and 2020. The production capacity of sewage operations continues to grow. In 2018, the design and operation capacity was over 1 million tons/day, and the processing capacity was over 500,000 tons/day. In the first half of 2019, the average daily design processing scale of operation projects under construction exceeded 200,000 tons. The company's new operation projects will increase operating profit. Benefiting from the increase in Hebei and industrial sewage treatment fees, the average water price of the company's sewage operations in 2018 increased from 1.0 yuan/ton to 1.2 yuan/ton. There is still room for future increases in the company's sewage treatment prices. Profit forecast. In the context of the gradual release of the water services market in small and medium-sized cities, the company's revenue and profit are expected to grow in 2019-2021. Net profit for the 2019-2021 net profit was 1.1/13/ 150 million yuan, respectively, and the EPS was 0.73/0.87/1.04 yuan/share, respectively. The corresponding PE valuations were 18.8X/15.6X/13.1X, respectively, covering the first time, giving it a “buy” rating. Risk warning: 1. Competition in the sewage treatment market in small and medium-sized cities has intensified; 2. Management risks brought about by the expansion of business scale.