1. Incident Overview The company recently released its 2019 performance report. It is expected to achieve annual revenue of 650 million yuan, +66% year-on-year, and net profit of 95 million yuan, an increase of 57% over the previous year. The profit growth rate is in line with the median forecast. The volume of environmental engineering+sewage treatment is expected to increase 57% in this express report, which is in the middle range of the previous performance forecast. Among them, Q4's profit for the single quarter is expected to be around 34 million yuan, an increase of nearly 100% year-on-year, and the growth rate continues to increase compared to the previous three quarters. We judge that the increase in profit is mainly due to the volume of the company's environmental engineering business. In 2018, the company announced orders such as PPP projects for domestic sewage treatment in rural Tongcheng, with an investment amount of nearly 1.4 billion yuan, setting a new record for the company. The company's sewage treatment and environmental engineering business revenue increased by 44% and 60% respectively in the first half of the year, and the scheduled construction of ongoing projects became the main driving force for the company's performance. According to the new regulations, the fixed increase plan was revised. The company with strong project financing guarantees previously announced that it would raise no more than 550 million dollars in non-public shares to raise no more than 550 million capital for the Huimin County Domestic Waste Incineration Power Generation Project, Tai'an Daiyue Xinxing Industrial Park integrated PPP project, and supplementary working capital. On February 18, the company announced revisions to the non-public offering plan to adjust the sales limit period to 6 months and adjust the distribution target to no more than 35 people. The company's balance ratio at the end of Q3 was 60.5%, lower than that of its peers. After the fixed increase is completed, the debt ratio will drop below 50%. Abundant cash and healthy financial conditions will further guarantee the implementation of the project. Steady operation, high-quality projects, long-term water engineering and waste-to-energy generation boost performance, and the company's business style is steady. 2/3 of 2018's gross profit came from sewage treatment operations. In 2019, the company announced that it won new bids for sewage treatment projects in Tai'an, Shushan and Quzhou, with a total investment of about 1 billion yuan. The project period is 1 to 2 years, and the results are expected to be released quickly. Since 2018, the company has entered the waste-to-energy sector by undertaking projects to be built under Shengyun Environmental Protection. Currently, it has 4 waste incineration power generation projects. The first phase has a total scale of about 2,100 tons/day. The Huimin and Chengde projects are expected to gradually be implemented in the next two years. The garbage disposal costs for the Dejiang Project and the Chengde Project were 75 and 95 yuan/ton respectively, which is higher than the industry average of 65 yuan/ton in 2019, which shows the high quality of the project. 3. Investment proposal The company has a steady business style. It is expected that the high-quality projects in progress will gradually be implemented in the next two years, while also entering the waste-to-energy business. We are optimistic about the company's future growth space. Assuming an increase in 2020 and diluting the current year's performance, we expect EPS to be 0.59/0.61/0.86 for 2019 to 2021, corresponding to the current stock price PE22/21/15x, slightly higher than the 2020 median PE forecast for the industry. Considering the company's superior financial situation to the industry and the certainty of fixed financing to increase project implementation, a certain valuation premium should be given to continue maintaining the “recommended” rating. 4. Risk warning 1. Ongoing project construction falls short of expectations; 2. The financing environment continues to be tightened.