Incident: On the evening of November 11, 2013, Baoli Asphalt issued an announcement: It signed a “Cooperation Framework Agreement” with Xi'an Huatong Renewable Energy Co., Ltd. (“Xi'an Huatong”) on the cooperation between the two parties to manage urban natural gas businesses in the Qujialing Management Area of Jingmen, Hubei Province, Gaotieling Town in Jiayu County, Hubei Province, Panjiawan Town in Hubei Province, and Huaxian County in Shaanxi Province. Contents of the agreement: Xi'an Huatong owns 100% of the shares in Qu Jialing Huatong Natural Gas, Huatong Gaotieling Branch, Panjiawan Town Branch, and Huatong Huaxian Branch. They are branches established by Xi'an Huatong in Gaotieling Town, Panjiawan Town in Jiayu County, Hubei Province, and Huaxian County in Shaanxi Province to engage in urban natural gas management, respectively, and have exclusive franchise rights for natural gas management in these regions. After this agreement is signed, Xi'an Huatong will establish wholly-owned subsidiaries in Gaotieling Town, Jiayu County, Hubei Province, Panjiawan Town, Jiayu County, Hubei Province, and Huaxian County, Shaanxi Province, and Huaxian County in Shaanxi Province. Party B will place the relevant assets, business, and personnel of Huatong Gaotieling Branch, Huatong Panjiawan Branch, and Huatong Huaxian Branch into wholly-owned subsidiaries set up by Party B locally (hereinafter collectively referred to as the “target company”). The company plans to use its own cash to acquire part of the shares of the target company held by Xi'an Huatong and/or obtain shares in the target company through capital increases. After the above equity transfer and/or capital increase is completed, Party A holds 51% of the shares in the target company and Party B holds 49% of the shares in the target company. The target company will become a holding subsidiary of the company. Who is Xi'an Huatong Renewable Energy Co., Ltd.? According to its website, Xi'an Huatong is a gas company. Its main business includes: investment, construction, and operation of CNG, LNG filling stations, and CNG automobile gas stations for urban natural gas projects; production, transportation, sales and operation of CNG and LNG; and investment and construction of urban natural gas pipelines and equipment. The company has a total of 65 gas projects in eight provinces (districts) in China. It includes 22 urban gas projects, 9 in operation, and 13 under construction; 37 CNG automobile gas stations, 23 seats in operation, 14 under construction; 4 LNG filling stations, 2 in operation, 2 under construction; 2 CNG mother stations, 2 under construction; 2 CNG mother stations, 1 in operation, and 1 under construction. The company is the first private enterprise in Shaanxi Province to enter the natural gas industry, and is one of the top 15 domestic gas enterprises. Entered natural gas operations and gradually entered the oil and gas field. The company's main business is the production and sale of modified asphalt, which is mainly used for the construction of high-grade highways, including highways. As demand for highways in China slows down, the company's business is gradually maturing. Since this year, the company has expanded into the oil and gas sector. By investing in Canadian oil and gas development, investing in the establishment of Xinjiang Baoli Petrochemical Co., Ltd., and investing in the construction of the “annual processing of 2 million tons of heavy crude oil and production of 1 million tons of petroleum asphalt project” in the Laisu Petrochemical Industrial Zone in Luntai County, as well as the current cooperation with Xi'an Huatong to enter the field of urban natural gas management, we believe this move is conducive to the continuation of the company's growth. Profit forecast and investment advice: Since the announcement is only a framework agreement, it has not determined specific matters such as equity transfers, capital increase prices, and price payment methods for this cooperation, etc., the profitability of the subject matter of the acquisition is not clear, and this incident is still uncertain. The profit forecast is maintained for the time being. The net profit for 2013/2014 was 118 million yuan and 137 million yuan, respectively, equivalent to EPS of 0.23 yuan and 0.37 yuan, up 22% and 17% from the previous year, maintaining the “increase in holdings” rating. Risks: Accounts receivable cannot be collected in a timely manner; demand for transportation infrastructure shrinks due to the macroeconomic downturn; execution of orders and projects falls short of expectations; raw material costs rise due to rising crude oil prices; acquisitions fall short of expectations.