Event description The company announced its 2016 mid-year report, achieving an EPS of -0.19 yuan, in line with expectations. Incidents commented that coal production and sales rose year on year, and increased month on month in the second quarter. In the first half of the year, the company's coal production was 5.1763 million tons, up 3.47% year on year; coal sales volume was 5.4519 million tons, up 13.52% year on year. In the second quarter, 2,5947 million tons of coal were produced, up 0.51% month on month; sales of 2,7635 million tons of coal were sold, up 2.79% month on month. The company's cost control was strong, and the gross profit per ton of coal rose year on year in the first half of the year. In the first half of the year, the company's revenue from tons of coal was 228.38 yuan, down 15.50% year on year; tonnes of coal cost was 184.18 yuan, down 24.78% year on year. The company reduced costs and achieved results. The gross profit per ton of coal was 44.20 yuan, up 73.98% year on year; the gross profit margin of coal increased 9.96 percentage points year on year to 19.36%. In the second quarter, the company's revenue from tons of coal was 220.83 yuan, down 6.49% from the previous month; the cost of tons of coal was 166.80 yuan, down 17.44%; the gross profit per ton of coal was 54.03 yuan, up 58.44% from the previous month; and the gross margin of coal increased 10.03 percentage points to 24.47%. In the first half of the year, the company generated 158 million kilowatt-hours, completing 52.67% of the annual plan. The period cost control was relatively good, mainly due to the reduction in employee remuneration. The company's expenses for the first half of the year totaled 371 million yuan, a year-on-year decrease of 15.44%. Among them, sales expenses and management expenses fell 15.92% and 27.99% year-on-year respectively, mainly due to reduced employee remuneration; financial expenses increased 10.99% year on year, mainly due to increased interest expenses. Overall, cost control was relatively good. The recovery in sales volume combined with strong cost and expense control, and the second-quarter results reduced losses month-on-month. The company's sales volume picked up in the second quarter. Combined costs and expenses were well controlled, and attributable net profit fell by 49 million yuan to -71 million yuan month-on-month. The recovery of the coal market in the third quarter will help further improve the company's performance. Pay attention to the progress of local supply-side reforms and give it an “increase in holdings” rating. The company's endogenous growth potential is relatively limited, so pay attention to the subsequent progress of supply-side reforms in Henan Province. We forecast the company's EPS for 16-18 to be -0.13, 0.04, and 0.06 yuan, respectively, giving it an “increase in holdings” rating. Risk warning: sharp macroeconomic decline, supply-side reforms falling short of expectations