Incident: 1. The company issued an announcement to establish a wholly-owned subsidiary, Hebei Liangneng Electricity Sales Co., Ltd., with a registered capital of 201 million yuan. 2. Six subscribers, including Taikang Asset Management Co., Ltd., raised about 1.3 billion yuan in non-public shares. The funds raised (after deducting the issuance fee) purchased 51% of Liangcun Thermal Power's shares and 61% of the heating company's shares from Hebei Company. The parties to the transaction agreed to determine the underlying asset transaction price of $918 million. The issue price is 19.19 yuan/share, the relevant assets have been transferred, and the relevant shares have been registered for listing. Key investment points: constant heat and electricity, stable unit load, and new energy as the main increment. The company is the main heating company in Shijiazhuang. The main unit is Liangcun Thermoelectric 600MW. It benefits from the use of heat determination. The unit has the highest utilization time in the network, and will remain stable in the future. It also has 70MW grid-connected photovoltaic power plants, and units under construction or soon to be built, such as 50MW photovoltaics in Pingding, 200MW wind power in Heshun, Shanxi, and 40MW wind power in Lingqiu, Shanxi, etc., are expected to be put into operation within 1-2 years. Future new energy is the company's main profit increase. The majority shareholders' asset injection commitment period is approaching, and the new energy assets of the Hebei branch are comparable to the company's installed capacity. The majority shareholders of the company are SDIC and SDIC Hebei Branch “two brands, one person”. In 2013, the majority shareholders promised to gradually inject eligible thermoelectricity-related assets and other high-quality assets in the Hebei region within three years. The majority shareholder commitment expires on January 15, 2017. Currently, the operating units other than those listed in the Hebei branch are mainly photovoltaics and wind turbines. By the end of 2015, there will be 150,000 kilowatts of wind power and 410,000 kilowatts of photovoltaics. We expect that by the end of 2016, the new energy installed capacity of the Hebei branch will exceed 800,000 kilowatts. According to the PE valuation level of about 5 times that of the company's previous injection into the Liangcun thermoelectric and photovoltaic project, if the assets of the Hebei branch are injected as scheduled, there is plenty of room for an increase in asset valuation. Based on its background as a state-owned power generation enterprise and the advantages of heating customers, the company will have a significant advantage when liberalizing electricity sales in Hebei. Hebei's plan to deepen the power system has been issued. The direct transaction scale of the Hebei South Grid, where the company is located, will reach 10 billion kilowatt-hours in 2016. The company has followed the trend and established Liangneng Electricity Sales Company as a wholly-owned company. According to Guangdong's trading experience, electricity sales companies set up by state-owned power generation companies can obtain more electricity at the beginning of the transaction. The company's majority shareholder background will have an advantage in obtaining electricity. At the same time, the company's industrial heating customers in Shijiazhuang are also the company's potential electricity sales customers in the future. Currently, the company is responsible for 70% of the heating for industrial customers in the province, and the electricity consumption of these users is over 10 billion dollars.? Profit forecast and investment rating: Without considering possible asset injections and electricity sales contributions, the company's EPS for 2016 to 2018 is estimated to be 0.64 yuan, 0.75 yuan, and 0.87 yuan, respectively. Corresponding PE is 27x, 23x, and 20x, respectively. We are optimistic about the company's dual performance in state-owned enterprise reform and electricity reform. At the same time, the share price of Liangcun Thermal Power and Heating Company was acquired at a fixed increase of 19.19 yuan/share in 2015. Currently, it is in an inversion stage, providing a margin of safety and giving the company an “increase in wealth” rating. Risk warning: risk is systemic risk; state-owned enterprise reform is uncertain; electricity reform is uncertain.