Event description Shengli Co., Ltd. released its 2015 annual report. During the reporting period, the company achieved operating income of 2,509 billion yuan, a year-on-year decrease of 12.63%, net profit of 287.394 million yuan, a year-on-year decrease of 21.70%, and basic earnings per share of 0.04 yuan; the company released its 2016 quarterly report. During the reporting period, the company achieved revenue of 601 million yuan, a year-on-year decrease of 14.18%, and net profit of 53.3691 million yuan (of which sales of Lu Yu Trading contributed 51 million yuan in net profit), an increase of 557.13% over the previous year, basic Earnings per share were $0.07. The incident commented that the natural gas business continues to gain strength, and the transformation is beginning to bear fruit. The company's performance in 2015 fell 21.70% year on year. The main reason was that the company's traditional business was affected by continued economic bottoming out, and revenue and gross margin declined significantly (① refined oil trading business: revenue fell 53.73%, gross margin was only 0.08%; ② agrochemical business: revenue fell 23.68%, gross margin was only 2.01%); on the other hand, the company's clean energy and natural gas business saw a sharp increase of 149.59% during the reporting period, with gross margin of 20.89%, making it the company's largest industry for the first time. At the same time, the company's 2016 quarterly report shows that natural gas maintained a rapid development trend, revenue increased 200% year on year, and the scale effect (high gross profit) brought about by natural gas business growth was gradually realized in performance. The strategic transformation is beginning to bear fruit, and the company is gradually entering a period of performance implementation. It is expected that traditional inefficient assets will be further divested in the future (agrochemical industry at the end of 2016, other industries by the end of 2017), and the company will gradually become a pure clean energy service provider. Extended acquisition+content development, two-wheel drive creates new gas prices. The company began to transform the natural gas industry in 2012 and began divesting the non-clean energy industry with low gross margin (divesting the biological industry at the end of 13), with the goal of building a comprehensive clean energy service provider. During the reporting period, the company achieved a two-wheel drive transformation of “epitaxial acquisition+content development” in the natural gas business: (1) epitaxial acquisition: mergers and acquisitions targeting urban gas franchises, and realized project cooperation in the four regions of Boyuan Natural Gas (Puyang), Shengli Shunda (Bazhou), Yimin Industrial (Dalian Zhuanghe), and Yimin Gas (Dalian Pulandian); (2) Content development: Construction of natural gas terminal projects, and the company has been in operation since 2013 The number of gas (oil) stations at Ginseng Holdings reached more than 150. Actively explore emerging businesses, and distributed energy is the next breakthrough point. The company is vigorously deploying distributed natural gas and building a microgrid for energy supply. This field will enter a period of high growth after experiencing the “first year of distributed natural gas energy”. The company has two major advantages in natural gas distributed energy projects: (1) low-cost gas source advantages: ① traditional gas sources supplied by CNPC, Sinopec, etc., ② gas source supply systems such as imported LNG, biomass natural gas, and coke clean energy; (2) industrial chain advantages: the company has a nationwide gas supply franchise, grafted with natural gas distributed energy, and can achieve upstream and downstream integration of the industrial chain. It has achieved the full benefits of the entire industry chain and helped the company successfully open up the upstream and downstream industrial chains. Profit forecast and valuation: We expect the company's 2016-2018 EPS to be 0.32, 0.48, and 0.54 respectively, and corresponding PE to be 21x, 14x, and 12x respectively, maintaining the “buy” rating! Risk warning: the government's distributed energy policy is lower than expected, and the company's epitaxial integration is lower than expected;