Investment highlights: Disclosure of the company's 2016 annual report. In 2016, the company achieved operating income of 4.535 billion yuan, a year-on-year decrease of 0.80%, and net profit attributable to shareholders of listed companies of 548 million yuan, an increase of 18.76% over the previous year. Earnings per fully diluted share were $0.22, and the dividend plan was $0.6 in cash for every 10 shares. Net profit grew steadily, gross profit increased, and venture capital earnings increased significantly. In 2016, Dazhong Public Utilities achieved revenue of 4.535 billion yuan, a year-on-year decrease of 0.80%. Among them, gas sales revenue was 3.764 billion yuan, down 2.13% year on year; construction revenue was 351 million yuan, down 11.01% year on year; municipal tunnel operating revenue was 14.78 million yuan, up 15.32% year on year; sewage treatment revenue was 145 million yuan, up 29.48% year on year; commercial revenue was 129 million yuan, up 7.73% year on year; and financial industry revenue was 1.96 million yuan. The company's comprehensive gross profit margin was 14.02%, up 0.07 percentage points from the previous year. In 2016, the company's sales expenses increased 17.17% to 168 million yuan, mainly due to the conversion of the natural gas sales pipeline network, which increased repair costs and social security. Management expenses increased by 29.70% to $384 million, mainly due to increased costs associated with the issuance of H shares. Treasury expenses fell 1.37% to $155 million, mainly due to increased exchange earnings. The company's investment income was 68,700 yuan, an increase of 4.67% over the previous year. Of this, Shenzhen Venture Capital contributed a total of 182 million yuan in investment income, an increase of 43% over the previous year. Highlights: Utilities+top venture capital, H-share listed capital operations are speeding up. Participation in top venture capital platforms: The company shares in two top venture capital platforms, Shenzhen Venture Capital and the Chinese Cultural Industry Fund. “Shenzhen Venture Capital”, with 13.93% of the company's shares, is the largest venture capital company in China. The subsidiary “Dazhong Capital” holds 12.82% of the shares in the Chinese Cultural Industry Fund. It is the first cultural industry private equity fund registered and approved by the National Development and Reform Commission. At the beginning of 2017, the company invested in the independent investment portfolio of the US Dollar Fund - the Xinhua Innovation Fund. High-quality venture capital finance projects have reserved abundant resources for the company's future high growth. Utilities contribute to stable cash flow, and H-share listed capital operations accelerate: The company's utilities involve the four sectors of urban pipeline gas, sewage treatment, public infrastructure, and urban transportation, contributing to stable cash flow. In December 2016, the company's H share issuance completed the listing transaction, raising a net capital of HK$1,445 million. 35% of the proceeds will be invested in pipeline gas supply business, 30% in sewage treatment business, 25% in other utility business, and the remaining 10% for working capital and general purposes. This overseas financing will help accelerate the expansion of the company's future gas, sewage and other businesses, and at the same time build an international financing platform for the company. Profit forecasting and valuation. The company is expected to achieve net profit attributable to the parent company of 703 million yuan and 864 million yuan in 2017 and 18, corresponding to EPS of 0.24 and 0.29 yuan/share, respectively. Referring to comparable company valuations, considering the future growth of the company's gas, water and other businesses, as well as the valuation premium of financial venture capital businesses, the company was given a buying rating of 35 times PE in 2017, corresponding to the target price of 8.4 yuan/share. Risk warning. (1) Gas prices have changed, and the company's gross margin has declined; (2) competition in the water industry has intensified; (3) the financial venture capital business is greatly affected by the capital market, and earnings fluctuate greatly.