The project is progressing as planned. Shunfeng announced this week that it has signed a strategic cooperation agreement with the Henan Luoyang Municipal People's Government, adopting a contract energy management model, which is consistent with the progress of the company's potential projects that we investigated at the end of April. This is Shunfeng's second green energy saving demonstration city project after the Changzhou strategic cooperation agreement signed in March this year. Among such projects, Shunfeng will provide facilities for solar photovoltaic power generation, urban and community lighting, heating and cooling, pure electric public transportation, electric vehicle charging facilities, and intelligent energy management systems. Green energy efficient city projects are expected to achieve an energy saving effect of 50%. Shunfeng's use of a contract energy management model is intended to generate sustainable profit income from urban energy efficiency plans over the next 25 years. Furthermore, according to the agreement signed by China Aviation Trust in early April, the two companies plan to establish a joint venture (each accounting for 50% of the shares). According to research, the joint venture will focus on energy-saving projects in commercial buildings, and China Aviation Trust is responsible for the joint venture's financing guarantee.

Shunfeng's first low-carbon project is expected to be completed in June. The new Hongqiao International School is Shunfeng's first project using a contract energy management model. It is expected to be completed in June 2015. Shunfeng built rooftop photovoltaic panels, provided ground-source heat pump technology to reduce air conditioning load, ensure hot water supply, and was equipped with LED lighting, which is estimated to reduce energy consumption by more than 50%. Our profit model does not reflect the profit that this project may bring, and the successful implementation of this project will raise Shunfeng's profit level in 2015.

Geothermal heat pump technology opens up the heating transformation market in the north. The joint venture established by Shunfeng and Nobao Group has begun negotiations and is committed to the transformation of centralized heating (boiler rooms) in northern China, with a market space of several billion dollars. According to research, Novo has no rival in this field in China.

Maintain buy ratings. We maintained that Shunfeng's recurring net profit in 2015 was 1.55 billion yuan (up 397% year on year), expected to reach 2.1 billion yuan in 2016 (up 27% year on year), and reached 2.7 billion yuan in 2017 (up 36% year on year). Excluding one-time earnings, diluted earnings per share remained at RMB 0.23 in 2015 (up 306% year on year), 0.31 yuan in 2016 (up 36% year on year), and 17E at 0.39 yuan (up 27% year on year) in 2017. The target price of HK$8.6 remains unchanged, equivalent to 15E 20x diluted earnings per share and 15E 2.8 PB. The stock price has 70% room to rise, and we maintain our buy rating.