Investment points: Cooperate the natural gas business and expand the natural gas market. Shengli Co., Ltd. signed an agreement with Beifang Gas and its shareholders. Beifang Gas used high-quality natural gas assets confirmed by all parties to establish a natural gas specialist company responsible for operating the natural gas market business in Anyang, Henan. Afterwards, the company used cash to acquire 60% of the shares in the newly established target company, and the agreement agreed that the transaction consideration should not exceed 66.6 million yuan. The company expects the target company to achieve annual natural gas sales revenue of about 100 million yuan over the next three years, which will have a positive impact on the company's earnings. This cooperation has accelerated the company's natural gas market layout in the Central Plains region and will further expand the scope of natural gas business operations. It is proposed to issue shares to purchase natural gas and other urban operation assets and raise supporting capital. Shengli Co., Ltd. plans to purchase underlying assets such as 100% of the shares of Jingzhou Jinghu Real Estate Development Co., Ltd. and Chongqing Xianda Industrial Co., Ltd. and 49% of the shares of Bazhou Shengli Shunda Gas Co., Ltd. held by Bazhou Shunda Natural Gas Co., Ltd. by issuing shares, while also raising supporting capital. Currently, the transaction method and underlying assets have not yet been finalized, so there is a possibility of readjustment. Entered the Bazhou natural gas market. The company signed a cooperation agreement with Bazhou Shunda Natural Gas to jointly develop and operate Bazhou natural gas business. At present, the commercial registration and bank account opening procedures for Bazhou Shengli Shunda Gas, a natural gas specialist company newly established by both sides, have been completed, and has entered trial operation. Shengli Co., Ltd. used 168.3 million yuan in cash to transfer 51% of Shengli Shunda Gas's shares to achieve control. Accelerate the development of natural gas business. The company began strategic transformation in 2012, positioning the clean energy natural gas industry as the company's leading industry in the future, and accelerated development of the company's natural gas business in 2016. Since 2015, the company has successively acquired natural gas city operation assets and expanded its natural gas business. The deal will help the company expand the natural gas market and gradually improve the industrial chain. Change the use of capital raised and develop natural gas pipeline network business. In order to adapt to changes in the market environment and accelerate the development of natural gas business, the company decided to change the use of capital raised to supplement the working capital required for the compressed development of natural gas business in Qingdao Runhao and Dongtai, vigorously promote and develop the natural gas pipeline network field with larger profit margins, higher profit stability, and better development prospects, and improve the efficiency of the use of capital. The total investment amount for the new gas station project of Qingdao Runhao and Dongtai Compression was 60.87 million yuan. The company decided to use all of this investment amount to permanently supplement the working capital required for the development of natural gas business in Qingdao Runhao and Dongtai. Profit forecasts and investment ratings. We expect Shengli Shares to have an EPS of 0.40, 0.43, and 0.52 yuan respectively from 2016 to 2018. According to the 2016 EPS and a price-earnings ratio of 20 times, we gave the company a target price of 8.00 yuan to maintain the “increased holdings” investment rating. Risk warning: transformation risk; natural gas business development progress falls short of expectations, etc.