1. Incidents Guozhen Environmental Protection released its 2019 annual report: 2019 achieved operating income of 4.170 billion yuan, up 4.08% year on year; net profit after deduction of 313 million yuan, up 13.22% year on year; 2020 quarterly report: first quarter of 2020 achieved operating income of 651 million yuan, down 5.54% year on year; net profit after deduction of 46 million yuan, down 21.69% year on year. 2. Our analysis and judgment (1) High-quality operating assets are a stable source of income for the company. The company's gross margin in 2019 was 24.89%, an increase of 2.86pct over the same period last year, mainly due to the increase in the share of operating business. The operating sector generated revenue of 1,375 billion yuan during the reporting period, accounting for 33.09% of the company's main business revenue. By the end of 2019, the company's water operations had covered 14 provinces across the country, with a total sewage treatment scale of 5.61 million tons/day and a pipeline network operation scale of 4,819 kilometers per year. Maiwang Environmental, a holding subsidiary, operates a total of 6 industrial water treatment plants and 1 coal chemical park through BOO and trusteeship operations. The total operating scale of industrial water is nearly 200,000 tons/day. In addition, during the reporting period, the company has announced 127 additional projects, including 107 engineering orders and 20 investment and operation orders. Adequate on-hand orders are also a guarantee for the company's future performance growth. (2) Leading industrial water treatment technology is expected to help the company expand its market share Maiwang Environment, a holding subsidiary of the company, is a first-class technology-oriented environmentally friendly energy integrated service provider in the domestic industrial sector. It has various industrial wastewater treatment technologies, such as an overall solution for the recycling of high-salt wastewater, an overall solution for the upgrading and treatment of intractable wastewater, and an overall solution for the deep reuse of industrial wastewater. At present, China has introduced more than 10 relevant standards for the industrial wastewater treatment industry, more than 30 national environmental standards for water pollutant emissions, and more than 20 local environmental standards for water pollutant emissions to regulate the development of the target industry. Favorable policies have been strengthened, industry demand has been released, and industrial wastewater treatment has gradually received attention. The company is expected to further expand its market share with its technical advantages in the field of industrial water treatment. (3) Join hands with China Energy to build a first-class energy saving and environmental protection industry group. In March 2020, the company announced that the controlling shareholder Guozhen Group will transfer 15% of its shares at a price of 14.66 yuan/share and entrust 6.26% of voting rights to China Energy Conservation. After the transaction is completed, China Energy will become the controlling shareholder of the company, and the State Assets Administration Commission will become the company's new actual controller. China Energy is the only state-owned enterprise in China whose main business is energy saving and emission reduction and environmental protection. It is the largest technology-based service-oriented industrial group in the field of energy saving and environmental protection in China. Guozhen Environmental Protection can rely on its own technical strength and operating experience, and take advantage of China Energy's advantages in order acquisition and financing channels to build a first-class domestic energy saving and environmental protection industry group. 3. Investment advice companies are specialized companies that provided “one-stop six-dimensional services” in the field of municipal sewage treatment earlier. After China Energy Holdings, the company will rely on its own technical strength and operating experience, and take advantage of China Energy's advantages in order acquisition and financing channels to build a first-class domestic energy saving and environmental protection industry group. Affected by the COVID-19 pandemic, the company's project progress slowed down in the first quarter of 2020. As the domestic epidemic is gradually brought under control and the industry's resumption of work and production continues to advance, the company's performance is expected to recover rapidly. We expect the company's net profit attributable to shareholders of listed companies in 2020 and 2021 to be 389/467 million yuan, up 19.38%/19.79% year-on-year, respectively. The corresponding EPS is 0.57/0.69 yuan/share, and the corresponding PE is 17.98x/14.86x, respectively, and is recommended for the first time. 4. Risks indicate the risk that governance demand falls short of expectations; the risk that policies are not as strong as expected; the risk that competition in the industry will intensify; and the risk that projects are progressing less quickly than expected.