Events: In 2019, the company achieved total operating income of 3.459 billion yuan, up 5.31% year on year; net profit attributable to shareholders of listed companies was 424 million yuan, up 3.93% year on year; net cash flow from operating activities was 1,235 billion yuan, up 37.58% year on year; and basic earnings per share of 0.48 yuan. The distribution plan is to distribute a cash dividend of 1.5 yuan (tax included) for every 10 shares. In the first quarter of 2020, the company achieved operating income of 658 million yuan, a year-on-year decrease of 18.42%; net profit attributable to shareholders of listed companies of 556 million yuan, a year-on-year decrease of 48.57%; and basic earnings per share of 0.06 yuan. Comment: The resource-based business is dragging down the growth rate of the company's overall performance. The company's operating income and net profit growth rate returned to single-digit growth in 2019. The main reason for this was: on the one hand, demand for the company's resource-based business products declined, prices fell, and product gross margin declined; on the other hand, as market competition intensified, the company strengthened market development efforts, and sales expenses increased significantly; at the same time, the company charged asset impairment preparations for other assets such as receivables and goodwill, totaling 117 million yuan, accounting for 27.59% of the net profit attributable to shareholders of listed companies in the current period. It is worth noting that due to the impact of the COVID-19 pandemic, upstream and downstream enterprises of 2020Q1 companies stopped work and cut production, demand for hazardous waste treatment and recycling business declined, and the decline in the price of recyclable products led to a significant decline in performance in the first quarter. The domestic resumption of work and production continued in mid-late March. The company actively expanded the market, promoted the construction of key projects, and increased the utilization rate of qualifications. It is expected that the hazardous waste market treatment demand will gradually improve after Q2. Demand for harmless disposal is growing steadily, and is expected to remain the main driving force for growth in 2020. In 2019, the domestic hazardous waste treatment market faced contradictions such as rapid growth in the supply of qualifications, low capacity utilization, and shortage of harmless treatment qualifications. At the same time, market participants are increasingly diversifying, including original environmental protection companies, cross-border real estate development companies, landscaping companies, and cement manufacturers, all entering this field. In 2019, the company's industrial waste treatment and disposal revenue was 1,667 billion yuan, up 29.55% year on year; gross profit margin was 50.35%, up 2.97 percentage points year on year. Of the company's new projects in 2019, 4 enterprises obtained hazardous waste business licenses, namely Shaoguan Renewable Resources, Dongjiang in Nantong, Dongjiang in Weifang, and Yongxingsheng in Zhuhai. In total, the company added 101,300 tons/year of incineration treatment capacity and 140,000 tons/year of physical and chemical capacity. Therefore, the increase in harmless treatment capacity and the increase in the utilization rate of qualifications are the main reasons for the increase in performance. The gross margin of the company's harmless treatment increased by 2.95pct year-on-year, which is expected to be affected by the reduction in unit costs due to the increase in capacity utilization. It is worth mentioning that the company's Tangshan Wandes, Nantong Dongjiang Physical Chemical, and Fujian Oasis Incineration projects have been completed and are applying for hazardous waste management licenses. At the same time, projects such as the Xiamen Dongjiang Expansion Project, Fujian Oasis Landfill Project, and Foshan Green Dragon are under construction, with a total production capacity of nearly 200,000 tons/year, and 80% of the production capacity is qualified for incineration and landfill. It is expected that the company's new production capacity structure will be more in line with market demand, and the harmless treatment capacity will continue to improve in 2020. At the same time, it is necessary to pay attention to the effectiveness of implementing measures such as enterprise technology reform, reducing production costs, and improving the utilization rate of qualifications. The resource-based business is clearly affected by commodity prices, so pay attention to fluctuations in downstream product prices. The company's resource products include metal products such as copper salt and nickel, which are clearly affected by downstream commodity prices. In 2019, the industrial waste resource utilization business achieved revenue of 1,075 billion yuan, down 12.46% year on year; gross profit margin was 23.18%, down 2.18 percentage points year on year. Since mid-February 2020, the main contract of Shanghai Copper has declined by nearly 20%, and Shanghai Nickel has also experienced a significant decline, which has had an adverse impact on the sales prices of the company's resource-based products. At present, the company is carrying out technical modifications to existing production lines, including improvements to the copper oxide production process and sulfuric acid wastewater production process, and technical improvement of process equipment for the Shaoguan Renewable Resources Heavy Metals Resource Project, which is conducive to reducing production costs and improving product quality. The company's resource processing capacity is 820,000 tons/year, leading the industry in production capacity scale. Considering the impact of the COVID-19 pandemic on global market demand, it is expected that the company's resource product production and sales business will still face some pressure in 2020. To account for significant asset impairment, continuous attention should be paid to changes in the profitability of subsidiaries. In 2019, the company accrued 117 million yuan for impairment of various assets, including 76.389 million yuan for other receivables and 38.996 million yuan for goodwill. The goodwill impairment preparations proposed in this issue come from Hubei Tianyin, Xiantao Luyi, and Dongheng Environment. As of December 31, '19, the company's goodwill was 1,288 billion yuan, mainly due to previous acquisitions of hazardous waste subsidiaries. There is still a certain risk of impairment of goodwill for each asset group in the later stages, so careful attention is needed. Maintain the company's “increased holdings” investment rating. As a leading enterprise in the domestic hazardous waste treatment industry, the company has faced various factors such as increased market competition, changes in the supply and demand structure, and the progress of its own project investment and construction. The company's performance growth rate has been slow in the past two years. However, considering the relatively high license barriers and technical barriers in the hazardous waste treatment industry, the company's long-term development is still worth looking forward to. It is estimated that the company's fully diluted EPS in 2020 and 2021 will be 0.55 yuan and 0.64 yuan respectively. Based on the closing price of 9.95 yuan/share on May 7, 2020, the corresponding PE will be 18.1 times and 15.5 times. The company's valuation level is reasonable, giving it an investment rating of “increased holdings”. Risk warning: commodity prices have fallen, sales prices of resource products have declined; construction progress of industrial hazardous waste concentration facilities has fallen short of expectations; emission standards have been raised, and investment costs have increased.