Events:

On June 8, 2017, Zhongfu Industry issued an announcement "termination Agreement with the original non-Public offering shares subscription Agreement". It involves four subscribers.

Zhongfu Industry announced on June 8, 2017 that Henan Zhongfu Power Co., Ltd., a holding company, acquired a 51% stake in Henan Zhongfu Thermal Power Co., Ltd., and held 49% before the acquisition.

Comments:

1. Zhongfu Industries issued an announcement to adjust its non-public offering plan again, adjusting the total amount of funds raised from no more than 3.15 billion yuan to no more than 1.25 billion yuan, and subscribing targets from 6 to 2. The original investment projects "Henan Cloud Computing data Center Project" and "repayment of interest-bearing liabilities of listed companies" were adjusted to only "repay interest-bearing liabilities of listed companies". The financing method of "Henan Cloud Computing data Center Project" has been adjusted from non-public offering to other financing methods.

Reduce the asset-liability ratio: Zhongfu Industries has higher financial expenses, as high as 960 million yuan in 2016. After the completion of this issue, the company's asset-liability ratio will be reduced from 77.63% to about 67.90%, the company's financial expenses are expected to be reduced by an annual rate of around 100 million yuan, and the financial situation will be further optimized and improved.

Firmly step into cloud computing and seek diversified development. The financing method of the original fund-raising project "Henan Cloud Computing data Center Project" has been adjusted from non-public offering to other financing methods, which shows the determination of the management.

2. Zhongfu Power's acquisition of a 51% stake in Zhongfu Thermal Power will help it to make full use of the waste heat of its own generating units, increase the heating area, further rationally allocate resources, improve energy efficiency, and increase the efficiency of the company.

3. The company has a complete industrial chain with the integration of coal, electricity and aluminum, with an annual output of 250000 tons of electrolytic aluminum and 420000 tons of aluminum processing plant. With the rise in aluminum prices, the company's profits have gradually improved.

4. Profit forecast and valuation

The profit margin of coal and aluminum increased sharply in 2017, which contributed to a substantial improvement in corporate profits. We expect coal and aluminum prices to remain high and have the momentum to continue to rise. We expect the company's homing net profit in 2017 18 / 19 to be 2.4 company3.3 / 380 million yuan, corresponding to PE's 34-24-21 rating of "prudent recommendation-A".

5. Risk tips:

Coal and aluminum supply-side reforms are not as expected, prices have fallen sharply, and corporate profits have fallen short of expectations.