From January to June 2010, the company achieved an operating income of 670 million yuan, an increase of 86.26% over the same period last year; an operating profit of 38.94 million yuan, a decrease of 35.42% over the same period last year; and a net profit of 32.97 million yuan belonging to the parent company, a decrease of 47.06% over the same period last year.

The operating income of the main products increased, while the profitability decreased. The company's main business includes oil products business and LPG business. Benefiting from the improvement of the domestic economy and the rebound of oil and gas demand, the volume and price of the company's products rose. In the first half of 2010, the company's oil business and LPG business achieved operating income of 420 million yuan and 240 million yuan respectively, an increase of 126.75% and 58.31% over the same period last year. However, due to the rapid rise in operating costs, fierce market competition, a sharp decline in product price spreads and reduced profit margins, the gross profit margins of the company's oil business and LPG business were 7.83% and 9.53% respectively in the first half of 2010, down 3.2 percentage points and 9.5 percentage points from the same period last year.

The participating enterprises have mixed feelings and sorrows, and the investment income is still the main source of profits of the company. In the first half of 2010, the company achieved investment income of 21.35 million yuan, accounting for 54.83% of operating profit, although it decreased by 30.15% compared with the same period last year, but it is still the main source of profit.

During the reporting period, the company held 18.61% of the equity of Shennan Electric Power. Due to the heavy losses of Shennan Electric Power, the company realized the investment income of-47.47 million yuan, down 471.83% from the same period last year. In addition, the company holds a 6.42% stake in Mawan Power and received a cash dividend of 60.99 million yuan in the first half of the year, an increase of 120.93% over the same period last year.

The warehousing business will become a new profit growth point. On December 31, 2009, the company acquired a 70% stake in Guangju Yisheng for US $32 million (218 million yuan).

With a total storage capacity of 116000 square meters, a special petrochemical wharf of 35,000 tons and a berth of 5000 tons, Guang Juyi is the largest bonded warehouse for liquid chemical industry in Shenzhen. In the first half of 2010, the company's warehousing business achieved an operating income of 12.82 million yuan and a gross profit margin of 40.23%, which was basically in line with our previous expectations. With the recovery of macro-economy, the turnover of warehousing business increases, and warehousing business will become another important source of profit for the company.

Profit forecast and investment rating. We estimate that the EPS of the company from 2010 to 2012 is 0.22,0.17,0.20 yuan respectively, and the corresponding dynamic price-to-earnings ratio is 29 times, 38 times and 32 times, respectively. We believe that it is difficult for the company to see obvious growth and maintain a "neutral" rating at present.

Risk hint. (1) the risk of substantial reduction of investment income, (2) the risk of substantial fluctuation of raw material prices, and (3) the risk of vicious competition in the LPG market.