The company disclosed its annual report for '19 and its quarterly report for '20. The gross margin of its main business continued to grow. Recently, the company released its 19-year annual report and quarterly report. In 2019, the company achieved revenue of 4.17 billion yuan, a year-on-year increase of 4.1%; net profit of 330 million yuan, a year-on-year increase of 16.3%; EPS (dilution) of 0.50 yuan/share; and a dividend ratio of 24.98%, an increase of 1.52% over the same period last year, with a dividend of 0.12 yuan per share. The company's net operating cash flow improved markedly in '19, reaching $81 million, compared to -60 million yuan in '18. In the first quarter of 2020, the company achieved revenue of 650 million yuan, a year-on-year decrease of 5.5%, and realized net profit of 48 million yuan, a year-on-year decrease of 19.8%. The main reason for the decline in performance was due to the impact of the COVID-19 pandemic. The company's projects under construction were unable to proceed normally as planned, and the progress of the project was affected to a certain extent. The gross margin of the company's main business in '19 reached 24.71%, an increase of 2.78% over the same period last year. By business, the company's revenue growth rates for comprehensive water environment management services, comprehensive industrial wastewater treatment services, and integrated environmental treatment services for small towns reached 16.3%, 33.3%, and -28.8% respectively, and gross margins reached 27.9%, 24.52%, and 14.95% respectively, up 3.22%, -0.08%, and -0.98% from the previous year. By the end of '19, the company's water operations business had revenue of 1,375 billion yuan, accounting for 33.09% of main business revenue, and gross margin reaching 38.33%. Both revenue share and gross margin increased year-on-year. By exploiting the advantages of “technology+operation and maintenance”, the company concentrates superior resources to ensure the implementation of high-quality projects, enhances project profits through refined operation, and increases the company's gross profit margin. In the future, as the scale of the company's operating projects expands and the quality of subsequent projects improves, the company's gross margin level is expected to continue to rise. By the end of '19, the company had a sewage treatment scale of 5.61 million tons/day, including 788,000 tons/day under construction; 1.88 million tons/day of trusteeship operation; a pipeline network operation scale of 4819 km/year; operating a total of 6 industrial water treatment plants and 1 coal chemical park, with a total industrial water operation scale of nearly 200,000 tons/day. In the future, as the company continues to expand, the scale of operations is expected to continue to expand. The company has sufficient orders in hand, improved the quality of the new winning projects, and the company added 3.04 billion yuan in engineering orders in 2019, confirmed revenue orders of 2.60 billion yuan. The total amount of on-hand orders at the end of the period was 3.93 billion yuan, while the total amount of orders in hand at the end of the period was 2.78 billion yuan, 2,650 million yuan and 4.63 billion yuan, respectively. In terms of franchise orders, the company added 620 million yuan in '19, an uncompleted investment amount of 2.76 billion yuan, and achieved operating income of 1.38 billion yuan, while the three figures for 2018 were 4.88 billion yuan, 5.96 billion yuan, and 1.18 billion yuan, respectively. The main reason for the decline in the company's operating orders is that the company is controlling the scale of new investment, increasing the requirements for the quality of investment requirements, and at the same time paying more attention to the custodial asset-light model. Currently, the company's reserve orders are still sufficient. With China Energy's investment, the company is expected to receive more high-quality projects. China Energy has joined Guozhen. Future synergies are worth looking forward to. On March 14, the company issued an announcement terminating the equity transfer agreement with the Three Gorges Group. At the same time, the company signed a contract with China Energy to transfer 15% of the company's total share capital to China Energy at a price of 14.66 yuan per share. After the transfer is completed, China Energy will hold 23.69% of the company's shares and 29.95% of the voting rights, making it the company's largest shareholder. China Energy has 178 subsidiaries in 11 provinces and cities in the Yangtze River Economic Belt. It has carried out 258 energy saving and environmental protection projects of various types, and has followed up more than 200 projects. However, as one of the participants in the protection of the Yangtze River, the company positions itself with “technology+operation” as an advantage. It is highly compatible with many industrial projects and businesses of China Energy Conservation, and can form effective collaboration and complementarity. The future prospects are worth looking forward to. Profit forecast: First coverage, recommended rating. We estimate that the company's net profit from 20 to 22 will be 380 million yuan, 440 million yuan and 5.1 billion yuan respectively, corresponding to EPS of 0.56 yuan, 0.65 yuan and 0.74 yuan, corresponding to PE 18x, 16x, and 14x. Risk warning: The completion of construction orders falls short of expectations, and the efficiency of production projects falls short of expectations