Key investment events The company released its 2017 semi-annual performance report yesterday evening. The company achieved revenue of 4,071 billion dollars during the reporting period, an increase of 6.11% over the previous year; net profit attributable to shareholders of listed companies was 252 million yuan, a year-on-year decrease of 34.44%; and net profit attributable to shareholders of the parent company after deduction was 250 million yuan, a year-on-year decrease of 34.11%. Our comments on this are as follows: Comment: Revenue increased steadily, and net profit declined year-on-year due to lower management and transportation costs. The company achieved revenue of 4,071 billion dollars in the first half of 2017, an increase of 6.11% over the previous year. In October 2016, the price of pipeline transportation in Shaanxi Province was reduced by 0.121 yuan per cubic meter. Affected by this, the company's comprehensive gross profit margin during the reporting period was 10.98%, down 4.69 pct year on year, and achieved net profit of 252 million yuan, down 34.44% year on year. The company's revenue mainly comes from two businesses: 1) Long-distance natural gas pipeline business. Revenue for the first half of 2017 was 3.722 billion yuan, up 6.01% year on year; gross profit margin was 11.08%, down 4.98 pct year on year. 2) Urban gas sales business, revenue for the first half of 2017 was 345 million yuan, up 8.78% year on year; gross profit margin was 9.72%, up 0.36 pct year on year. Judging from growth points, revenue growth mainly comes from the long-term natural gas pipeline business. During the reporting period, the company seized the market opportunities brought by “iron fist to cure haze” and signed a “iron fist to control haze” gasification project cooperation framework agreement with eight cities in Guanzhong to promote increased sales. At the same time, the company's engineering project construction vigorously promoted: the Meixian to Long County gas pipeline project achieved ventilation and ignition, and the Hanzhong Disaster Recovery Backup Control and Command Center was completed and put into operation. The third phase of the Jingxi Line completed intermediate inspection, and completion of other pipeline projects was being carried out quickly. It is also progressing in an orderly manner. With the reduction in value-added tax on natural gas, the company's profit is expected to stabilize. After two cuts in pipeline fees in 2015 and 2016, gas prices in Shaanxi are currently at a low level across the country, and there is limited room for future reductions. During the reporting period, the company set up a leading group to seek natural gas price policies to carry out research on implementation opinions on natural gas pipeline transportation prices and pricing costs, and achieved phased results. Furthermore, starting from July 1 this year, the value-added tax on natural gas was lowered from 13% to 11%, and the company's profit level is expected to rise in the future. The policy continues to gain strength, and downstream gas sales demand is guaranteed. 2017 marks the end of the first phase of the “Air Pollution Prevention and Control Action Plan”, and various policies continue to promote air pollution control. 1) Shaanxi Province launched the “1+9” campaign to combat haze with an iron fist in March, and plans to reduce coal by 10 million tons in 6 cities and 2 districts in Guanzhong, which will strongly promote the conversion of coal to gas and increase downstream demand; 2) The National Development and Reform Commission announced “Opinions on Accelerating the Use of Natural Gas” on July 4, which clearly gradually cultivates natural gas as one of the main energy sources in China's modern clean energy system. By 2020, natural gas will account for 10% of the primary energy consumption structure. The fixed increase issuance has been accepted by the Securities Regulatory Commission, and the company has applied for 1 billion more medium-term notes. 1) The company issued a fixed increase plan in December 2016 to raise 1.5 billion yuan to expand the pipeline, and was accepted by the Securities Regulatory Commission on June 28, 2017. After the fund-raising investment project is put into operation, the company's long-distance natural gas pipeline will grow from 3,300 kilometers to 3,788 kilometers, and the annual gas transmission capacity will increase from 135 to 14.5 billion cubic meters. 2) On the evening of August 15, the company issued an announcement to issue medium-term notes of no more than 1 billion yuan and a term of not more than 5 years to supplement the company's operating capital, replace bank loans, and project construction expenses. The company uses this to enhance its capital strength and effectively address the capital needs of the company's development. After the fund-raising investment project is put into operation, the company's profitability will be further enhanced. Investment advice: Give an increase in holdings rating. The net profit attributable to the company from 2017 to 2019 is estimated to be 4.12 million yuan, 4.69 million yuan, and 546 million yuan respectively, corresponding valuation levels 23, 20, and 17 times. Based on the company's profit prospects, for the first time, we were given an increase in holdings rating. Risk warning: Project progress falls short of expectations