Net profit to mother increased 20.17% year on year in the first three quarters of 2016, net profit after deducting 29.85%. The company released the 2016 three-quarter report. Total revenue for the first three quarters was 454 million yuan, up 16.38% year on year; net profit to mother was 74.0792 million yuan, up 20.17% year on year; net profit after deducting net income to mother was 687.987 million yuan, up 29.85% year on year. Third-quarter results rebounded from the semi-annual report. It is expected that Daling's accounts receivable will still suppress the annual performance reporting period. The company's industrial water treatment, solid waste treatment and flue gas treatment business profits were stable, and municipal water treatment business profits continued to grow; at the same time, the company's comprehensive environmental protection industry innovation and technology service platform reaped revenue. The company currently has contracts of 3.23 billion yuan. The performance growth rate for the first three quarters was up from 18.57% at the time of the semi-annual report, but we expect that the company's full-year results will still be suppressed by asset impairment losses due to bad accrual of older accounts receivable. From January to September 2016, the company's asset impairment loss was 15.4474 million yuan, compared to 9.1607 million yuan in the same period last year, an increase of 68.63%. The company's accounts receivable in the third quarter were 442 million yuan, down 1% from the previous quarter, indicating that there has been no fundamental improvement in accounts receivable collection for more than 2 years. Six PPP agreements for sludge disposal were signed, with the first phase totaling 1,100 tons/day. The 20% flexible performance company issued an announcement on the same day announcing the signing of a total of 6 PPP agreements for combined sludge power generation in Zhumadian, Henan, Nanjing, Jiangsu, Jiangyin, and Xuzhou (Huaxin and Huarun 2 projects). The above project involved an investment of 220 million yuan of the company's own capital. The first phase of the plan is to dispose of a total of 1100 tons of sludge, equivalent to an annual treatment capacity of 400,000 tons. Among them, with the exception of the Jiangyin project, which signed a cooperation agreement, the remaining 5 projects have signed formal agreements, and the franchise period is between 10-20 years. Based on an estimate of a net profit of 50 yuan per ton processed, we believe that the above project is expected to bring about 20 million net profit to the company, which is about 20% more flexible than in 2015. The most competitive sludge coupling power generation solution provider in the market has accelerated our belief that the sludge power plant coupling dry incineration treatment model promoted by the company has a competitive advantage of low cost and easy epitaxial extension due to the cooperative network of its power plant customers. At present, the Nanjing project (360 tons/day) has officially passed the EIA. We have calculated that the capacity utilization rate is as high as 116%; the Changshu BOT project (300,000 tons/year) has entered the civil construction stage. The disposal price for both projects did not exceed 230 yuan/ton, ranking in the lowest price range in the whole market. The concentrated implementation of 6 major PPP sludge orders means that the company's sludge business has entered the accelerated implementation stage. Driven by the urgent market demand for sludge disposal and the government's push for solid waste PPP, the company's prospects are promising. The scale of the first phase of this project was generally small, and the short-term performance contribution was limited, but the geographical extension of the company's sludge project exceeded market expectations, and its strategic value is worth paying attention to. Keep the profit forecast unchanged, maintain the “buy” rating. We maintain the profit forecast at the time of the semi-annual report review. We expect to achieve net profit of 1.26, 1.59, and 194 million yuan in 2016-2018, corresponding to the dynamic PE of 44, 35, 29 times, and maintain the “buy” rating. Risk warning: Inadequate recovery of accounts receivable, PPP progress falls short of expectations