Investment highlights: The company discloses its annual report for '16 and its quarterly report for '17. In 2016, the company achieved operating income of 1,030 billion yuan, an increase of 51.67% over the previous year, and net profit attributable to shareholders of listed companies of 141 million yuan, an increase of 82.75% over the previous year. A cash dividend of 0.10 yuan will be distributed to all shareholders for every 10 shares, and 5 shares will be added to all shareholders for every 10 shares using the capital reserve fund. In the first quarter of 2017, the company achieved revenue of 199 million yuan, an increase of 52.59% year on year, and net profit of 24 million yuan to mother, an increase of 67.22% year on year. The gross margin increased, the management expense ratio and financial expense ratio increased, and the sales expense ratio declined. In 2016, Baan Water achieved revenue of 1,030 billion yuan, an increase of 51.67% over the previous year. Among them, Sponge City's revenue was 513 million yuan, up 4.68% year on year; municipal engineering revenue was 230 million yuan, up 206.05% year on year; and seawater desalination revenue was 209 million yuan, up 306.04% year on year. The main reason for the increase in the company's revenue is that the company's main business (sponge city, municipal engineering, seawater desalination) all increased significantly compared to the same period last year. The company's consolidated gross profit margin was 33.72%, an increase of 6.28 percentage points over the previous year. Among them, the gross profit margin of Sponge City was 29.18%, a year-on-year decrease of 0.09 percentage points; the gross profit margin of municipal engineering was 30.46%, up 20.47 percentage points from the previous year; and the gross profit margin of seawater desalination was 47.39%, up 2.37 percentage points from the previous year. Sales expenses increased 46.95% year over year to 31.84 million yuan, sales expenses rate decreased 0.10 percentage points to 3.09% year over year; management expenses increased 113.45% year over year to 81.53 million yuan, management expenses increased 2.29 percentage points year over year to 7.91%; financial expenses increased 63.48% year over year to 35.91 million yuan, and financial expenses ratio increased 0.25 percentage points year on year to 3.49% year on year. Investment income was 8.97 million yuan, a year-on-year decrease of 5.08%. Non-operating income and expenditure was 4.13 million yuan, a year-on-year decrease of 12.80%. Being the first to lay out seawater desalination, the technology has an advantage: the company obtained seawater desalination technology reserves through the acquisition of KWI, LW and iTN. At present, the construction of the Cangzhou Sea Desalination Project has begun, and an 830,000 yuan strategic framework agreement of 100,000 tons/day has been signed for Xianren Island in Yingkou City. Sea desalination technology+ order, the company took the lead in the desalination business. PPP+ Sponge City: In February 2016, the company won the bid for the PPP project for ecological protection and comprehensive utilization of the Wenhe Wetland Ecological Protection and Comprehensive Utilization Project in Tai'an. The total investment of the project was 1.28 billion yuan, and the cooperative operation period was 12 years; the second phase of the Liupanshui Shuicheng River Comprehensive Treatment Project, which was contracted by the company, is an important part of Liupanshui Sponge City. The Tai'an and Liupanshui projects enabled the company to have rich experience in PPP+ Sponge City projects, which have a demonstration effect. Adequate on-hand orders: The company currently has a total of nearly 2 billion unconfirmed revenue orders, and sufficient orders guarantee steady growth in performance. Fixed increase support: The company privately issued 72.82 million shares and raised 1.2 billion yuan, of which 1 billion yuan was invested in the construction of the second phase of the Shuicheng River Comprehensive Management Project in Liupanshui City, and 200 million yuan was used to repay bank loans. Profit forecasting and valuation. The company is expected to achieve net profit of 231, 3.31, and 476 million yuan owned by the parent company in 2017-2019, corresponding EPS of 0.52, 0.74, and 1.07 yuan. Referring to comparable company valuations, the company was given 45 times PE in 2017, corresponding to a target price of 23.40 yuan, and a purchase rating. Risk warning. Outdated mergers and acquisitions integration risks, etc.