Matter: The company announced the acquisition of GALAXY NEWSPRING PTE for 100 million US dollars. 50% of LTD's shares, sold by Mitsui & Co., Ltd. Comment: Active deployment outside the province to strengthen national development strategy companies have used their capital, resources, and management advantages since listing to actively expand their business outside Yunnan Province and have achieved good results. The fields and regions of business coverage have continued to expand. By the end of 2015, the total design capacity of the company's sewage and tap water was 2,231 million tons, of which the scale of projects outside the province reached 32.2%. After the completion of this acquisition, the total treatment capacity of the company's water projects will increase to 3.77 million tons, while the share of business outside the province will further increase to 59.9%, a significant increase. We believe this acquisition will further strengthen the company's business layout outside the province and is in line with the company's development strategy. Currently, the proposed acquisition targets operate 24 water supply, sewage treatment and reclaimed water plants in various provinces and cities in China, including Jiangsu and Shandong. The total treatment capacity of the project is 1,540,000 tons, of which the treatment capacity of the projects already in operation is 920,000 tons. In terms of profitability, the losses of GALAXYNEWSPRING PTE from 2014 to 2015 were 6.23 million and 15.31 million US dollars, respectively. Considering factors such as the large size of its single unit and the strong ability of the government where the project is located to pay, we believe that it is related to factors such as large losses or poor management of the special project after it is put into operation. Considering that the company has been deeply involved in water-related fields for many years and has rich management experience, it is expected that in the future, the profitability of the target to be acquired will be enhanced through various measures such as improving management efficiency, cutting costs, and improving the relationship between the project company and the local government. We expect that after the subsequent normalization of operations, the proposed acquisition target's annual net profit may exceed 100 million yuan, which in turn injects medium- to long-term impetus into the company's performance growth. As far as the purchase price is concerned, from the perspective of replacement costs (assuming the cost of one ton of water is 2,000 yuan), the purchase price falls within a reasonable range. The equity ratio for this acquisition is 50%. The company is not yet able to control the board of directors and cannot be combined, and actual control of the target to be acquired is a key prerequisite for further improving the profitability of the project. Based on this, we do not expect to rule out the possibility that the company will further acquire 50% of GALAXY NEWSPRING PTE's shares held by other shareholders in the future. In addition to using active epitaxial mergers and acquisitions to acquire projects, the company is also actively using the PPP model to seek endogenous growth and actively expand the external water market through both endogenous and epitaxial expansion. The company began experimenting in the PPP field as early as 2011 and has rich practical experience. At the beginning of its establishment in 2011, the company established four investment models that are highly compatible with PPP, including resource compensation, large water services model, combination of heavy assets, and improvement of the living environment. Recently, it has signed a number of PPP cooperation agreements with government departments or partners in Fujian Province, Renhuai City in Guizhou, Zhanjiang, Guangdong, etc., and it is expected that the company will seize the opportunity to rapidly expand the scale and regional expansion of the water sector. It is expected that the company will seize the opportunity and achieve rapid scale expansion and regional expansion in the domestic water services market. Risks suggest that projects under construction are not progressing as expected, and external mergers and acquisitions are progressing slowly; there is a risk of repayment of accounts receivable; and factors such as tight land finances may have led to a decline in the government's willingness or ability to pay. Maintaining the “buy” rating. Considering that the scale of this merger and acquisition is still within our expectations, the profit forecast of 0.34/0.43/0.52 yuan from 2016 to 2018 remains unchanged. Currently, the P/E corresponding to the stock price is 11/9/7 times higher. Taking into account factors such as the multi-business sector, which is expected to continue to increase in the company's performance, advantages in membrane treatment technology, rich experience in the PPP field, the current results of the hazardous waste & solid waste business layout, and the expectation that the merger and acquisition strategy will continue to advance, referring to the valuation level of comparable companies, it was given 14 times P/E in 2016, corresponding to the target price of HK$5.48, maintaining the “buy” rating.