1. Event Overview The company announced its 2012 performance forecast, achieving revenue of 649 million yuan, an increase of 25.20% over the previous year; net profit of 81.88 million yuan, an increase of 13.10% over the previous year; and earnings per share of 0.72 yuan, in line with our previous expectations. 2. Analysis and judgment The increase in revenue and profit, and the steady increase in the company's operating income and profit, mainly benefited from the expansion of the company's production capacity to meet the steady growth of the local oil service market in southwest Sichuan. At the same time, with its dominant position in the field of drilling fluids, the company is also progressing smoothly in market development. Furthermore, following the oil giants, it has also taken the first step in developing business in overseas markets. The main revenue comes mainly from the obvious regional nature of the company's business in the southwest region, mainly in southwestern Sichuan Province, and the short-term revenue growth mainly comes from Sinopec, accounting for about 85%. The southwest Sichuan region where the company is located is an important natural gas producing region in China. Among them, Puguang Gas Field and Yuanba Gas Field are rich in reserves, and investment in exploration and development will continue to increase in the future, which is the root cause of the steady growth of the company's performance. The country's demand for natural gas is growing rapidly. As a major energy consumer, China's demand for energy has led to an increase in import dependence year by year, and its dependence on crude oil imports has already exceeded 55%. During the 12th Five-Year Plan period, natural gas consumption will rise sharply from the current 100 billion square meters to 250 billion square meters, while the domestic supply will only be about 150 billion cubic meters, and a large part will need to be imported. Faced with the tight supply and demand energy structure, the state has given a lot of support and encouragement to private enterprises at the policy level, opening up space for the development of the industry, and companies will benefit from this. 3. Profit forecasts and investment recommendations anticipate fully diluted EPS in 2012-2014 to be 0.72, 0.88, and 1.07 yuan, respectively. The corresponding closing price PE was 28, 23, and 19 times, respectively. The current valuation is reasonable. We gave the company a “careful recommendation” rating, with a target price of 18 yuan. 4. Risk warning: The sharp drop in international oil and gas prices has caused Sinopec's investment in Sichuan to weaken; the pace of entry into the new oil field market is lower than expected.