Key investment events: The company released its 2016 interim report in the evening: achieving revenue of 574 million yuan, an increase of 55.85% over the previous year; net profit attributable to shareholders of the parent company of 171 million, an increase of 51.94% over the previous year; net profit after deduction of 170 million yuan, an increase of 61.41% over the previous year. Our comments on this are as follows: Review the continuing strength of the engineering business, and the performance is in line with expectations. During the reporting period, the company achieved revenue of 574 million yuan, an increase of 55.85% over the previous year; net profit attributable to shareholders of the parent company of 171 million, an increase of 51.94% over the previous year; and net profit after deduction of 170 million yuan, an increase of 61.41% over the previous year. The high increase in performance in the interim report is in line with our previous expectations. Revenue side: The tap water business is growing steadily, and the engineering installation business is expanding. The tap water business was 230 million, up 3.76% year on year, gross profit margin was 49.95%, gross margin fell 4.37 pct; engineering installation business was 328 million, up 147.28% year on year, gross profit margin was 61.00%, and gross margin fell 2.77 pct. Profit side: The tap water business's profit declined due to the rise in maintenance costs due to the freezing disaster at the beginning of the year, and the overall profit of the engineering installation business rose rapidly. In the first half of the year, the company's net profit attributable to shareholders of the parent company was 171 million yuan, of which 1) tap water business: net profit of 39 million, compared with 51 million in the same period last year, there was a decline. The main reason was that a serious freezing disaster occurred in the Jiangyin region in February this year. Direct repair costs increased by nearly 12 million, and depreciation for pipeline network and equipment renewal increased 5.5 million. 2) Engineering business: Net profit of 124 million yuan, an increase of 127.26% over the previous year. The reason for the sharp increase in engineering business revenue and profit is that the company undertook construction and installation contracts for the Jiangyin Qishan Backup Water Source Project (148 million), the Jiangyin Qishan Emergency Backup Water Source Project (523 million), the water supply business housing construction project (164 million), the Xiaowan Water Plant advanced treatment project (088 billion), and the Jiangyin Pipeline Network upgrade project, sufficient orders and strong profitability can support the company's continued growth in performance. The potential to exceed expectations may come from state-owned enterprise reform or extension! (1) Background: State-owned enterprise reform. Local governments have the motivation and ability to cultivate their own listing platforms and restructure the profitability and financing capabilities of their own sons through a series of hematopoietic tools — executive incentives, high-quality asset injection, help in obtaining high-quality projects, etc. The company also announced an equity incentive plan in the early stages, and subsequent plans may be worth looking forward to. (2) Cash in hand increased to $2.04 billion, which can support the company's subsequent extension activities. As of the end of June 2016, the company had $1,169 million in cash and $880 million in other current assets (mainly bank structured deposits and wealth management products), totaling more than 2 billion dollars, which could support the company's subsequent extension activities. Investment advice: maintain an accumulation rating! We maintain our previous performance judgment. We expect net profit of $380 million, 462 million, and $566 million in 16-18, with a current market value of $8.2 billion, and corresponding valuations of 21.5 times, 18 times, and 14 times. We believe that: (1) undervaluation and sufficient orders in the engineering business will support the company's high performance growth over the next three years; (2) state-owned enterprise reform is the source of the company's current poor market expectations; and (3) sufficient cash on hand can support extended expectations. Based on this, maintain the accumulation rating! Risk warning: delays in order confirmation, systemic risk in the general market