Main points of investment:

Low temperature vacuum dehydration and drying integrated equipment leader, with obvious technical advantages, the company is a domestic leading enterprise of low temperature vacuum dehydration and drying integrated equipment, the main business is to provide sludge dewatering and drying and waste gas purification technical equipment and services for urban and industrial (park) sewage treatment plants (stations), with equipment research and development, design, manufacturing, integration, installation and operation and maintenance services of the whole industry chain. The integrated technology of low-temperature vacuum dehydration and drying independently developed by the company has formed two major innovations: 1) creatively combine mechanical pressure filtration dewatering and vacuum drying technology into one to realize efficient sludge dewatering, low-temperature drying and process energy saving, it fills the gap in the integrated treatment technology of sludge dewatering and drying at home and abroad; 2) the manufacturing level of the core component of high-temperature drying filter plate has reached the international leading level. Compared with the traditional "two-stage" dehydration process, this technology has the advantages of low operating cost, small footprint and environmental friendliness. It has been selected into the catalogue of National Advanced pollution Prevention and Control Technologies (Water pollution Prevention and Control Field) of the Ministry of Ecology and Environment in 2019 and the catalogue of Major Environmental Protection Technologies and equipment encouraged by the State (2017 Edition) of the Ministry of Science and Technology of the Ministry of Industry and Information Technology

And so on, the technical advantage is obvious.

There are sufficient orders on hand, and the steady growth of performance is guaranteed.

With its core technological advantages, the company has achieved high growth in recent years. From 2016 to 2019, the company's revenue increased from 103 million yuan to 343 million yuan (with an average annual compound growth rate of 49.37%). After deducting non-attributable net profit, it increased from 17.66 million yuan to 59.15 million yuan (with an average annual compound growth rate of 49.62%). In the first half of 2020, the company achieved revenue of 152 million yuan (+ 54.83%). After deducting the non-attributive net profit of 26.06 million yuan (+ 95.32%), it still achieved high growth against the trend under the influence of the epidemic. The end-of-hand orders of the company from 2016 to 2019 were 3.91,4.50 and 552 million yuan respectively, and the amount of orders continued to reach record highs. At the same time, the company is actively expanding BOT business and extending to the application field of solid-liquid separation of industrial solid waste and special materials, sufficient on-hand orders and the expansion of new models and new areas to ensure the steady growth of the company's performance.

Listing to improve production capacity, capital and other strength, is expected to take advantage of the industry Dongfeng to achieve rapid development for a long time, there is a serious phenomenon of "heavy water over mud" in China, and sludge treatment facilities are insufficient. The sewage treatment capacity of urban + county towns in China is 215 million cubic meters per day in 2018. According to the calculation that 10,000 tons of domestic sewage can produce 5-8 tons of sludge (water content is 80%, the average calculation is 6.5), the capacity of harmless disposal of sludge needs 13.98 million tons per day. According to the data of E20, the total scale of harmless disposal of urban sludge in 2018 is 742 million tons / day, and there is still a capacity gap of 46.91%. E20 predicts that China's sludge production will increase at an annual rate of 10%, 15%. With the increasingly stringent national environmental protection policy, we believe that the sludge industry is expected to usher in a period of rapid development.

The net amount of funds raised by the company listed on the stock market is 764 million yuan, with an excess of 263 million yuan. The funds raised will be used for:

1) expansion project of complete sets of technology and equipment for low temperature vacuum dehydration and drying; 2) new R & D project of environmental protection technology and equipment; 3) supplementary liquidity. These projects are carried out around the company's existing main business, which are measures to increase the company's production capacity, enhance its R & D strength, and supplement working capital. The availability of funds can improve the company's financial situation, enhance the company's popularity and market competitiveness, and help the company to take advantage of the industry to achieve express development.

Profit forecast and investment rating: coverage for the first time, giving the company an "overweight" rating. We are optimistic about the development prospect of the sludge industry and the company's leading position in the industry. It is estimated that the company's 2020-2022 EPS is 1.26,1.78,2.20 yuan respectively, and the corresponding share price PE is 51,36,29 times, giving the company an "overweight" rating for the first time.

Risk hints: lower-than-expected risk of sludge policy and implementation, lower-than-expected risk of company order acquisition and execution, lower-than-expected risk of fund-raising projects, significant increase in accounts receivable risk, interest rate upward risk, macroeconomic downside risk.