Company profile: The company is mainly engaged in comprehensive natural gas utilization business, covering middle and downstream industrial chains such as gas source development and transportation, long-distance pipeline network construction and management, urban gas management and sales, vehicle gas station investment and operation, LNG supply, and distributed energy project development and construction. Backdoor listing was completed in 2012, and the name was changed to Jinhong Energy in May 2013. In addition, the company is also actively developing environmental engineering business, which is expected to become a new highlight of its performance. Long-distance pipelines establish competitive advantages, build and operate gas across regions, and build an integrated middle and downstream industrial chain. Long-distance pipelines across regions are the company's core competitiveness, and all regions where they are built have exclusive competitiveness. By the end of 2016, the total mileage of the company's pipeline construction reached 6,934 kilometers, and the total mileage of pipelines put into production reached 6,569 kilometers; the company has franchise rights in 28 cities and has built 21 CNG stations and 11 LNG filling stations; the company's long-distance pipeline length is 884.16 kilometers, and the design gas supply capacity is 3.1 billion cubic meters per year. The business is deeply deployed in the “coal-to-gas” core area to reap policy dividends. On February 17, 2017, the Ministry of Environmental Protection issued a notice on the “2017 Air Pollution Prevention and Control Work Plan for Beijing-Tianjin-Hebei and Surrounding Areas”, which defines the “2+26” urban agglomeration as the first batch of implementation of the winter clean heating plan in the northern region. The implementation of “coal-to-gas” work is imminent. The “2+26” urban agglomeration is mainly distributed in Hebei, Shandong, Shanxi and other provinces. The company has 7 long-distance pipelines in these regions and has obtained urban gas concessions along the route. With the implementation of the “coal-to-gas” project, the company's performance is expected to improve dramatically. Deeply involved in Zhangjiakou, and signed a 2 billion m2/year gas supply agreement with Datang International. The company completed the acquisition of Suzhou Tianhong, Kuancheng Borui, and Leiyang State Reserve in 2016, expanding the “point-of-supply” business and expanding the market scope. On July 20, 2017, the company announced that it had signed a strategic cooperation agreement for a gas cogeneration project with Datang International Power Generation Co., Ltd. Zhangjiakou Power Plant. The agreement agreed that the Datang International Zhangjiakou Power Plant will have a maximum annual gas consumption of 2 billion standard cubic meters/year. The gas cost will be settled at a price of 1.95 yuan/cubic meter. The term of the cooperation agreement is 20 years. Give it an “Overweight” rating. On May 11, 2017, the company released the 2017 semi-annual performance forecast, which is expected to increase by 30%-50%. Supply-side reforms have boosted the company's customer performance and increased gas consumption; benefiting from favorable “coal-to-gas” policies in the Beijing-Tianjin-Hebei region, as well as mergers and acquisitions and the implementation of some projects under construction, performance in the first half of 2017 is expected to increase by 30%-50% over the same period. It is estimated that in 2017-2019, the company's EPS will be 0.65, 0.90, and 1.09 yuan, and the corresponding PE will be 28, 20, and 16 times. Considering that the company's performance is highly elastic and directly benefits from the “2+26” surrounding coal-to-gas policy, it will give 22 times PE in 2018, with a target price of 19.80 yuan. Risk warning: 1. The progress of corporate mergers and acquisitions fell short of expectations; 2. After the peak of the coal-to-gas policy, the strength of the policy may slow down, and the implementation of local government subsidies fell short of expectations; 3. The prosperity of the downstream natural gas energy industry declined.