Key points of the report The company released its 2013 annual report on the evening of March 18. The company achieved operating income of 734 million yuan, attributable net profit of 18.82 million yuan, and basic earnings per share of 0.07 yuan in 2013, up 8.2%, 3.2%, and 3.2% year-on-year respectively, and maintained a slow growth rate overall. Incident review Venture capital performance will double and increase the company's net profit. Paradise Silicon Valley, where the company participated 27.9% of its shares, will achieve a smooth exit from the project and realize investment returns in a policy environment of restarting the second round of IPOs and speeding up approval of mergers, acquisitions and restructuring. It is estimated that in 2014 and 2015, Paradise Silicon Valley will achieve net profit of 240 million yuan and 290 million yuan, and will accordingly contribute investment income of 6699 and 81 million yuan to the company, doubling the year-on-year increase. In terms of valuation, the average valuation of the foreign venture capital industry is 34 times, of which the average valuation levels of Blackstone and Carlyle are about 35 times. Therefore, there is room for improvement in corporate valuations. Looking at each project, Paradise Silicon Valley currently has a total of 7 projects, with an estimated investment amount of 100 million yuan. Considering management fees and profit sharing, it is expected that 2014 and 2015 will bring a total investment income of 134 million yuan; in terms of listing, the shares of the four listed companies held by the company management fund, with a total market value of 4.1 billion yuan; the company currently manages 5 mergers and acquisitions funds. In the long run, M&A funds will become one of the main strategic directions of Paradise Silicon Valley. In November 2013, the Zhejiang Provincial Committee proposed the “Common Governance of the Five Waters” to provide a favorable external policy environment for the development of the company's main water business. Moreover, the water treatment capacity is higher than that of similar water companies with a similar market value, and the business volume is growing steadily. At the same time, a fixed increase will bring about an inflection point in the operation of the main water business. Currently, the company expects a fixed increase of 100 million shares, raise 745 million yuan in capital, and expand and strengthen the company's main water business. The estimated internal rate of return for various projects is 10%. Furthermore, the company's net profit from water services has remained below 6% for a long time, significantly lower than other listed water companies (10%-20%). Mainly due to the company's high sales expenses ratio, it is expected that the profit margin of the main water business will be greatly increased through cost control. The company's performance will reach an inflection point in 2014, and the driving factors are more determined: 1. The second round of IPO restart and mergers, acquisitions and restructuring will accelerate the release of venture capital performance. Among them, 7 current projects, 4 listed projects, and 5 M&A funds will bring investment income to the company 66.99 million yuan, doubling performance; 2. Combined with Zhejiang's “common governance of the five waters” policy environment, the company will increase capital raising 745 million yuan, which will expand and strengthen the company's water supply and sewage treatment business; 3. The divestment of the water conservancy industry will simultaneously reduce the negative factors of the company's performance Will recover 430 million yuan Collection of accounts. It is estimated that the company's EPS in 2014 and 2015 will be 0.41 million yuan and 52 million yuan respectively, corresponding to the current stock price PE of 19 times and 14 times respectively, maintaining the recommendation!