Key points of the report Incident description The company released its 2015 annual report today, achieving an EPS of -0.54 yuan, in line with expectations. Incident review The company's coal production and sales declined year on year. Overall industry demand was weak in 2015. The company's annual coal production was 10.42 million tons, down 4.84% year on year; coal sales volume was 10.14 million tons, down 3.89% year on year. Among them, the company produced 2,7663 million tons of coal and sold 2,6021 million tons of coal in the fourth quarter. In 2016, the company plans to produce 1.05 million tons of raw coal, down 3.55% from this year's actual production. The gross margin of the company's coal business declined. The company's revenue from tons of coal in 2015 was 246.86 yuan, down 30.07% year on year; the cost of tons of coal was 226.56 yuan, down 11.53% year on year. Due to the weak coal market, the gross profit margin of the coal business was 8.22%. Down 19.24 percentage points year over year. Among them, the company's revenue from tons of coal in the fourth quarter was 189.78 yuan, down 28.80% from the previous three quarters; however, the cost per ton of coal was 106.78 yuan, down 60.14% from the previous three quarters. The company had effective cost control in the fourth quarter, with gross profit per ton of coal rising 84.35 yuan to 83.00 yuan over the previous three quarters. The company generated 337 million kilowatt-hours in 2015, a year-on-year decrease of 10.61%. The planned power generation capacity for 2016 was 300 million kilowatt-hours, down 10.98% year-on-year from 2015. The cost control during the period was better, and the management expenses dropped significantly. Under the weak market, the company increased its cost management. The total expenses for the period of 2015 were 831 million yuan, down 20.19% from the previous year. Among them, sales expenses, management expenses, and financial expenses decreased by 16.90%, 22.77%, and 15.26%, respectively. The company's cost reduction in the fourth quarter paid off, and its performance loss decreased month-on-month. The company's gross profit for the fourth quarter increased by 208 million yuan month-on-month to 160 million yuan, mainly due to effective cost reduction. In the fourth quarter, it achieved attributable net profit of -117 million yuan, a month-on-month decrease of 138 million yuan. 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, and it is expected to benefit from supply-side reforms in Henan Province and keep an eye on future developments. We forecast the company's 16-18 EPS to be -0.37, -0.32, and -0.29 yuan respectively, giving it an “increase in holdings” rating. Risk warning: macroeconomic decline sharply, supply-side reforms falling short of expectations