Incidents: The company released its 2017 annual report. Operating income during the reporting period reached 6.33 billion yuan, an increase of 22.3% over the previous year, and achieved net profit of 520 million yuan, corresponding to EPS of 0.72 yuan/share, an increase of 16.1% over the previous year; accrued large asset impairment reached 770 million yuan, affecting net profit of 4.6 billion yuan in the current period. At the same time, the company plans to distribute cash dividends of 2.2 yuan (tax included) for every 10 shares to all shareholders, for a total of 160 million yuan. Coal production and sales have declined slightly, and mines under construction are progressing steadily. Raw coal production and commercial coal sales in 2017 were 8.35 million and 5.46 million tons respectively, down 6% and 20% from the previous year, mainly due to the transfer of its Longdong coal mine at the end of 2016. Currently, the company has 3 pairs of production mines (Xuzhuang, Kongzhuang, and Yaoqiao), with a total production capacity of 8.05 million tons/year, and supporting coal washing plants with a production capacity of 8.2 million tons/year. The mines under construction are located in Xinjiang (106 coal mines, Weizigou mine) and Shanxi (Yuquan mine), with a total production capacity of 5.7 million tons/year, of which 106 coal phase I (1.2 million tons/year) is nearing completion. Benefiting from the steady progress of mines under construction, the company's raw coal production is expected to reach 835, 935, and 10.85 million tons in 2018-2020, with a year-on-year increase of 6.3%, 12.0% and 16.0%. Taking into account significant depreciation, the coal sector is expected to enter the market lightly in the future. It is estimated that the profit and loss of the coal sector in 2017 was about 590 million yuan, including asset impairment losses of 740 million yuan, such as mining rights, construction in progress, and non-current assets. If impairment losses are not included, the real profit and loss of the coal sector can reach 1.15 billion yuan, corresponding to a net profit of 210 yuan/ton of coal. Supply in the coal industry continues to be tight over the long term, and coal prices are expected to remain high. Despite a certain rebound in costs, the net profit per ton of coal is expected to remain around 200 yuan/ton. The coal sector is expected to contribute 12.3, 14.1, and 1.61 billion yuan in 2018-2020, up 56.1%, 14.5%, and 13.8% year on year. Businesses such as electricity and aluminum processing continue to drag down performance. It is estimated that in 2017, electricity, aluminum processing and other businesses lost 0.5, 100 million yuan, and 120 million yuan respectively. Considering that the prices of both electrolytic aluminum and coal are high, seriously reducing the gross profit margin of aluminum processing and power business, it is expected that the next three years will still have a significant impact on the company's performance. Currently, the 2*350,000 kilowatt cogeneration project is still under construction, and there is still time to wait for it to be put into operation. Profit Forecast and Rating: Upgraded to “Prudent Recommendation - A” rating. Profits in the coal business will continue to improve, and after significant impairment is taken into account, it will go into battle even more lightly. As one of the three coal listing platforms owned by China Coal, the company's operations are stable, and there is currently no expectation that it will be integrated. The estimated net profit for 2018-2020 is 8.9/10.6/1.2 billion yuan, corresponding to EPS of 1.24/1.47/1.67 yuan/share, an increase of 71%/19%/13% over the previous year. Risk warning: sharp correction in coal prices; progress of projects under construction falls short of expectations; calculation of large asset impairment losses