The performance is lower than expected, and the profit forecast should be lowered appropriately.

According to the performance of KuaiBao, the company achieved operating income / return net profit of 1.67 billion yuan in 2019, compared with-2.5% of the same period last year. The net profit of home ownership is at the lower end of the range of 1.2-170 million yuan on January 23, which is lower than the market and our expectations, mainly due to the decline in the price of by-products of water treatment agents compared with the same period last year, changes in the management of the same environment and impairment of goodwill. We appropriately reduce the profit forecast, and it is estimated that the company's return net profit from 2019 to 2021 will be 13,000,000 yuan (before the adjustment is 2.4pm 290m). Taking into account the emergency adjustment of the company's product categories during the epidemic, the expansion of disinfectant production and water treatment agents may help 2020 of the performance to stabilize, with reference to the comparable company's average Pram E 12x in 2020, we give the company 11-13xP/E in 2020, corresponding to the target price of 13.25-15.66 yuan per share, maintaining the "buy" rating.

4Q19 performance declined compared with the same period last year, and the follow-up impact of the contemporaneous environment is expected to be controllable.

4Q19 achieved operating income / return net profit of 540 million yuan, compared with the same period last year. The decline was mainly due to: 1) although the company announced on October 10, 2019 that it had removed Mr. Song Yingbiao, the former management of Tongsheng Environment, from the post of director, the change of management still had a negative impact on its 4Q19 operating performance. 2) the company will conduct a systematic impairment test on the same environmental goodwill in the 2019 annual report, and the company expects that the impairment of goodwill will be a drag on the performance; 3) the price of by-products of water treatment agents will decline compared with the same period last year. Tongsheng Environment is a wholly owned subsidiary of the company. although this management change has a negative impact on 2H19's performance, we expect the follow-up impact to be manageable. At present, the chairman personally manages the subsidiary, and the performance is expected to be back on track in 2020.

1Q20 disinfectant production contributes to incremental performance, and capacity expansion promotes performance stabilization.

The company announced on February 10, 2020 that after the outbreak, the wholly-owned subsidiary Qingyuan Water treatment and Ande Technology urgently adjusted the product types, increasing the production of 84 disinfectants, peracetic acid disinfectants and other products. Ande Technology has obtained a license issued by the Xi'an Health Commission for the period from February 8 to the end of the first-level emergency response to epidemic prevention and control, and the company is actively preparing to apply for extension. According to our research, Ender Technology currently has a production capacity of about 1 million tons of disinfectant per day, and we expect that the sales of related disinfection products during the epidemic will make an incremental contribution to the company's 1Q20 performance. At the same time, on June 17, 2019, the company issued 490 million convertible bonds, which was mainly used for the annual production of 180000 tons of water treatment agent expansion project. the company expects trial production in mid-2020. we judge that production line expansion should boost production and boost performance.

Target price 13.25-15.66 yuan, maintain the "buy" rating

Although the company's performance in 2019 was dragged down by the year-on-year decline in the prices of by-products of contemporaneous environment and water treatment agents, the production and sales of disinfection products by wholly-owned subsidiaries Ander Technology and Qingyuan Water treatment during the epidemic should make an incremental contribution to 1Q20 performance. At the same time, the company plans to expand the main water treatment agent production capacity of 180000 tons, and it is expected that the trial production in the middle of 2020 should boost production and boost performance. We appropriately reduce the profit forecast, and it is estimated that the company's return net profit from 2019 to 2021 will be 13,000,000 yuan (before the adjustment is 2.4pm 290m). With reference to the comparable company's average Pamp E 12x in 2020, we give the company 11-13xP/E in 2020, corresponding to a target price of 13.25-15.66 yuan per share, maintaining a "buy" rating.

Risk hints: the contribution of disinfectant sales to performance is lower than expected; the trial production progress of water treatment agent is lower than expected; and the performance of contemporaneous environment is lower than expected.