1. Incidents Bosch released its 2019 annual report: 2019 achieved operating income of 3,244 billion yuan, a year-on-year increase of 19.07%; realized net profit of 282 million yuan, a year-on-year increase of 20.30%, and EPS of 0.79 yuan/share, a year-on-year increase of 19.70%; quarterly report 2020: the first quarter of 2020 achieved operating income of 632 million yuan, a year-on-year decrease of 1.42%; net profit of 61 million yuan, a year-on-year decrease of 14.16%. 2. Our analysis and judgment (1) Optimizing the business model. Cash flow improved significantly. During the reporting period, the company continued to adjust its business strategy and business model to further optimize the on-hand order structure and the quality of newly signed orders. Mainly EP, EPC and professional technical service orders, and most of them were projects with strong livelihood attributes with strong payment capacity, short cycle times, and guaranteed cash flow, and comprehensive strengthening of accounts receivable recovery management. The company's net operating cash flow in 2019 was 105 million yuan, compared to -43 million yuan in the same period last year. The net operating cash flow increased significantly over the same period last year. In the first quarter of 2020, the company's revenue fell 1.42% year on year, and net profit was down 14.16% year on year. Affected by the COVID-19 pandemic in the first quarter, the resumption of work by the company and upstream and downstream enterprises was generally delayed, and project construction implementation progress slowed down, resulting in a slight year-on-year decline in the company's operating income and profit in the first quarter of 2020. (2) Actively promoting project operations and rapidly increasing in scale. In 2019, the company achieved operating revenue of 162 million yuan, an increase of 173.43% over the previous year. Among them, the operating revenue of water supply projects accounted for 36.22%, the operating revenue of sewage projects accounted for 20.60%, the operating income of solid waste projects accounted for 31.71%, and the operating revenue of oil cement disposal projects and landfills accounted for 11.15%. Up to now, the company has officially entered commercial operation and obtained franchise rights for a total of 5 water projects; 7 projects have entered the trial operation stage; 4 solid waste operation projects; 2 sludge disposal and landfill operation projects; and 23 ongoing third-party hosting and operation projects. As the sanitation, sludge disposal, and ongoing PPP projects undertaken by the company gradually enter the operation stage, the scale of the company's operating assets will continue to expand, and the share of operating income in main business revenue will increase year by year. (3) Introduce state-owned strategic investors and deepen industrial layout. During the reporting period, the company and Guangxi Environmental Protection Industry Investment Group Co., Ltd. signed a “Strategic Cooperation Framework Agreement”, which plans to make long-term strategic investments in the company through equity. As a large-scale state-owned environmental protection industry platform in the Guangxi Autonomous Region, Guangxi Environmental Investment helps the company obtain more business resources and financial support. In the future, the two sides will carry out in-depth cooperation in the fields of sewage treatment, soil restoration, solid waste disposal, and garbage disposal within the Guangxi Autonomous Region, which is of great significance in deepening the company's industrial layout and implementing medium- to long-term development strategies. 3. Investment recommendations The company continues to adjust its business strategy and business model, further optimize the current order structure and the quality of new orders, focusing on EP, EPC and professional technical service orders; actively adjust the main business revenue structure, gradually reduce the share of engineering revenue, increase equipment sales revenue and operating income, and ensure steady growth in the company's performance in the future. We expect the company to achieve operating income of 3,972/4.687 billion yuan in 2020/2021, net profit attributable to shareholders of listed companies of 348/409 million yuan respectively, corresponding to EPS of 0.98/1.15 yuan/share, and corresponding PE of 11.24x/9.55x respectively, giving recommended ratings. 4. Risks indicate the risk that policies are not as strong as expected; the risk that competition in the industry will intensify; and the risk that the project is progressing less quickly than expected.