Event: the company releases its 2023 half-yearly report. In the first half of 2023, the company achieved revenue of 605 million yuan, an increase of 15.27% over the same period last year, a net profit of 137 million yuan, an increase of 23.75% over the same period last year, and a deduction of 140 million yuan for non-net profit, an increase of 28.62% over the same period last year.

Deep ploughing local water affairs, engineering business-driven growth: the company is the local water leader in Jiangyin City. mainly engaged in tap water system and sales, drainage and related water treatment business, water supply engineering design and technical consultation, water quality testing, water meter measurement and testing and investment in public infrastructure industry and other business. The steady growth of the company's revenue scale is mainly driven by engineering business, including tap water pipeline installation project, one household one meter renovation project, and so on. In the first half of 2023, the company's engineering business was driven by the new residential water supply project to grow to 240 million yuan, an increase of 51.98% over the same period last year, and is expected to continue the growth trend. At the same time, the new drainage network also led to the demand for operation and maintenance, the company achieved operation and maintenance income of 60.28 million yuan in the first half of 2023, the follow-up is expected to help the company to achieve further growth.

The forward-looking layout is expected to benefit from the demand for intelligent water network: the outline of the National Water Network Construction Plan issued by the State Council proposes to strengthen the digital construction of the water network, deepen the integration of the national water network project and the new infrastructure construction, and promote the digital and intelligent construction of the water network project. The company established its subsidiary Shanghai Huacheng Water Resources in 2022 and developed businesses such as "smart water" and "intelligent drainage" by virtue of its profound accumulation in the water field, and demonstrated innovative projects such as data collection module at the Shanghai Water Show in 2023. The company's active layout is expected to benefit from the release of industry demand.

Jointly develop new energy field: the company and Wuxi China Resources Gas jointly invest in Jiangsu Runcheng New Energy, jointly invest in the construction and operation of the company's water plant and sewage treatment plant photovoltaic business, other users distributed photovoltaic, energy storage and other comprehensive energy projects, and signed a photovoltaic project investment agreement with Wuxi China Resources Gas in the first half of 2023. Photovoltaic business is expected to strengthen the coverage of the company's business and open up new profit growth points.

Investment suggestion: due to the policy drive, the investment demand of the local government is expected to drive the company's project income to grow continuously. We estimate that the operating income of the company from 2023 to 2025 is 15.31,18.02 and 2.094 billion yuan respectively, the net profit is 3.51,4.24 and 509 million yuan respectively, and the EPS is 0.38,0.45,0.54 yuan respectively. Cover for the first time, giving a "buy" rating.

Risk tips: the macro environment is not as expected, new business research and development is not as expected, and market competition is intensified.