Investment Rating - The report rates the environmental protection industry as "Overweight," indicating that the industry is expected to outperform the overall market [9]. Core Insights - The municipal water sector shows stable operations, with some companies benefiting from strategic expansions and adjustments in sewage treatment prices. However, the engineering business is expected to decline due to decreased demand [3]. - The waste incineration sector remains stable, with operational improvements despite a slowdown in new project construction and bidding. Different companies exhibit varied performance due to factors like historical revenue recognition and depreciation from new capacity [3]. - The sanitation market is stable, with an increase in orders for unmanned sanitation services, indicating a digital transformation in urban services [3]. - Equipment performance varies significantly across different sectors, with conventional equipment facing margin pressure due to intense competition, while power environmental equipment benefits from increased demand [3]. Summary by Category Municipal Water - Overall stable operations with some companies like Tianyuan Environmental and Zhongshan Public Utilities showing significant year-on-year net profit growth of 18% and 32% respectively for Q1-3 2025 [4]. Waste Incineration - The sector is experiencing steady operational improvements, with companies like Huanlan Environment and Green Power expected to see net profit growth of 16% and 15% respectively for Q1-3 2025 [4]. Sanitation - The sanitation market is stable, with companies like Yingfeng Environment and Yuhua Tian expected to see net profit growth of 3% and 5% respectively for Q1-3 2025 [4]. Equipment - Conventional equipment companies are expected to see a decline in net profit growth, with Jingjin Equipment projected to drop by 25% for Q1-3 2025. In contrast, Qingda Environmental is expected to see a significant increase of 255% [4]. Investment Recommendations - The report recommends investing in companies with stable profitability and improving cash flows in the municipal environmental sector, including Zhongshan Public Utilities, Junxin Co., and Huanlan Environment [3]. - For unmanned sanitation, companies like Yingfeng Environment and Yuhua Tian are highlighted as key players in the digital transformation of urban services [3]. - The report also suggests focusing on SAF suppliers and green methanol producers as EU policies begin to take effect, with companies like Haineng Energy and Pengyao Environmental being potential beneficiaries [3].