A pioneer in the water treatment industry, expanding into the field of organic solid waste. Established in 1984, Pengyao Environmental Protection is an established water treatment enterprise. It has focused on the water treatment industry for more than 30 years. It has a full industrial chain of R&D and design, equipment manufacturing, engineering contracting, investment and operation. Currently, the sewage treatment scale is 1,114,000 tons/day, and the water supply scale is 400,000 tons/day, and the performance is relatively stable. In recent years, the company has expanded into the field of organic solid waste, opening up new growth space. The organic solid waste disposal industry has a broad market space. Driven by policies such as waste-free cities and garbage sorting, the organic solid waste industry has ushered in unprecedented development opportunities. We estimate that the market space for municipal sludge, food waste, and livestock and poultry manure is 100/278/185 billion yuan respectively. If we add other organic solid waste such as straw and industrial sludge, the market space is even larger. From a circular economy perspective, anaerobic fermentation and aerobic composting are encouraged disposal methods for organic solid waste. The water business is growing steadily, and there is still potential for expansion, expanding new performance highlights for high-end equipment. The company's water business operates on a scale of 1,514,000 tons/day, with 746,000 tons/day under construction and proposed construction. The compound growth rate for gradual operation over the next two years is 22.18%. The company's business style is steady. It did not participate in vicious PPP competition in previous years. With the improvement of the industry, the company ushered in good development opportunities. New orders in 2019 were 2.72 times that of 2018, leading to a reversal in performance (forecasted net profit surged 72.37% to 81.29% year on year). The company has strong operating attributes and good cash flow. At the same time, it has an on-hand capital of 500 million yuan. The balance ratio is only 39.95%, and there is still plenty of room for expansion. At the same time, it is investing in the construction of an intelligent manufacturing park for environmental protection equipment, and plans to launch two star products, prefabricated water plants and convenient solid waste fermentation equipment, to add new performance highlights. With the introduction of YM bacteria technology to create a leader in the segment, the organic solid waste business is ready to go. The company introduced YM bacteria ultra-high temperature fermentation technology from Japan+ acquired Lianye Technology+ joined forces with Ma Sheng Environment to enter the field of organic solid waste disposal to treat sludge, kitchen, livestock and poultry manure. Currently, it has demonstration projects in Changchun Nong'an, Fuzhou, Beijing, Nangong, etc., and is expected to be promoted and replicated across the country in the future to create a leader in the field of segmentation. The organic solid waste business is poised to go forward, which is worth looking forward to. The company's equity incentive performance assessment will increase by 30% over the next three years, with long-term investment value. Profit forecast and investment rating: Upgraded to a “buy” rating. The company's water business is growing steadily, and the organic solid waste business is gaining momentum. We are optimistic about the company's development prospects. Combined with the company's equity incentives and 2019 performance forecast, we raised the company's profit forecast. We expect the company's 2019-2021 EPS to be 0.62, 1.04, and 1.34 yuan, respectively, corresponding to the current share price PE of 23, 14, and 10 times, and raise the company to a “buy” rating. Risk warning: risk of project acquisition and progress falling short of expectations; risk of a sharp increase in accounts receivable; risk of slow progress in organic solid waste business; risk of falling short of expectations in environmental equipment business; downside risk of macroeconomic downturn