Incident: According to the announcement, the company plans to raise no more than 1.88 billion yuan from no more than 35 specific investors, of which about 1,322 billion yuan will be used to acquire the energy-saving assets of the distribution grid of nine integrated energy service companies under the jurisdiction of the State Grid and related EMC contract rights and obligations; the remaining capital raised will be used to supplement working capital and repay bank loans. After the issuance was completed, there was no interbank competition between the company and the controlling shareholders and their affiliates. Expanding and strengthening the power grid energy saving business, the market share is expected to increase: As a distribution grid energy saving listing platform under the State Grid, the company's main business includes two parts: power supply and distribution grid energy saving. The distribution grid energy saving projects carried out by the company are mainly distributed in eastern coastal regions such as Zhejiang and Fujian, and have gradually expanded to western regions such as Xinjiang and Ningxia. The underlying assets related to this transaction are mainly distributed in nine places including Mengdong, Liaoning, Hebei, Henan, Sichuan, Jiangsu, Zhejiang, Beijing, and Gansu. Since expanding the energy saving business of distribution grids in 2016, the company's energy saving service revenue has increased year by year, from 370 million yuan in 2016 to 1.25 billion yuan in 2019, an average annual increase of 50.0%. According to the announcement, the operating income and net profit of the proposed energy-saving assets in 2019 were 290 million yuan and 110 million yuan respectively, and the revenue and net profit of the energy saving business increased by 23% and 28%. After the completion of this transaction, the further integration of provincial platforms is conducive to improving the company's distribution grid energy saving service business layout, enhancing the brand's competitive advantage, and further increasing market share. The impact of the epidemic on the company's main business is limited, and projects under construction are still waiting to be put into operation: the epidemic has had little impact on the company's existing distribution grid energy saving projects, and there has been a slight impact on the electricity sales business. Since the gross profit margin of the company's electricity sales business (6%) is far lower than that of the distribution grid energy-saving business (36%), and the share of revenue tends to decline, the impact of the current epidemic on the company is limited. According to the annual report, as of the end of last year, the amount of projects under construction by the company was 160 million yuan, of which 140 million yuan was for infrastructure projects. The implementation progress of the energy saving transformation phase II of the Zhejiang power grid and the second phase of the energy saving transformation of the Xinjiang distribution grid was 9% and 33%, respectively. Considering that the construction period of the company's distribution grid energy-saving transformation project is about one year, both projects are expected to be put into operation in the second half of this year, which will support revenue and profit at that time. The State Grid is vigorously developing integrated energy services, and the company is expected to benefit. The State Grid Corporation regards the integrated energy service business as an important future profit growth point. In 2019, integrated energy services achieved business revenue of 11 billion yuan, an increase of 125% over the previous year. According to the State Grid development strategy plan, its integrated energy service business will achieve revenue of 80 billion yuan in 2025, becoming the main driver of the industry; in 2030, it will exceed 300 billion yuan and become a demonstration leader in the integrated energy service industry. State Grid Integrated Energy Service Group was founded in January 2013, formerly known as State Grid Energy Saving Service Co., Ltd., the parent company of Fuling Electric Power. Currently, Fuling Electric Power's distribution grid energy saving business is closely related to integrated energy services, and is expected to benefit from the major development of the State Grid integrated energy service business. Investment advice: increase holdings - A investment rating, target price of 25 yuan for 6 months. We expect the company's revenue growth rates in 2019-2021 to be 5%, 10%, and 10% respectively, net profit of 460 million yuan, 590 million yuan, and 590 million yuan, respectively, and price-earnings ratios of 19.5 times, 16.8 times and 14.9 times. Risk warning: The progress of the project has fallen short of expectations, and the progress of reforms on the electricity sales side has fallen short of expectations.