Investment highlights: 1. The incident company released a performance forecast for the first three quarters of 2016. In the first three quarters, the company achieved net profit attributable to shareholders of listed companies of 8.42 million yuan to 10.37 million yuan, an increase of 30%-60% over the previous year. 2. Our analysis and judgment (1) The business layout of the three major sectors has been perfected and the three new mergers and acquisitions have promoted growth. After the company went public, it now has the ability to manufacture and service oilfield targeted wells and horizontal well equipment, oil field environmental protection, smart granaries, smart water services, smart cities, etc., forming the three main industries of automation, oil and gas services, and smart industries. In the first half of 2016, the company's three main businesses developed in a balanced manner. Among them, the oil and gas service and smart industry business showed a clear upward trend. According to the company's 2016 semi-annual report data, in the first half of the year, the company's automation business achieved revenue of 54.65 million yuan in the first half of 2016, the oil and gas service business achieved revenue of 33.16 million yuan, and the smart industry business achieved revenue of 36.15 million yuan. The company recently raised a fixed increase of 400 million yuan in capital, of which the company plans to invest 271 million yuan in Hangzhou Smart Industrial Park and 129 million yuan to collect three new 52.4% of shares. This fixed increase has now been completed in the third quarter, and Sanda has promised that the 2016-2017 performance will not fall below 2,530 million yuan or 28 million yuan. We believe that in the first three quarters, the company continued to improve its business layout, and the performance of the three major business segments continued to improve. At the same time, due to the impact of the new mergers and acquisitions, the company's performance increased rapidly year on year. We expect that the contribution of Sanda's new performance in the fourth quarter will be even more prominent, which will promote rapid growth in the company's performance throughout the year. (2) Horizontal expansion into smart granaries and other “smart +” businesses. According to the characteristics of the company's RTU products suitable for unattended environments, the company actively explores application fields such as smart grain storage and smart water services through epitaxial mergers and acquisitions, etc., including: (1) The company successfully entered the field of smart grain banks through the acquisition of some shares in Zhejiang Qiushi Jiahe Information Technology Co., Ltd. and Zhengzhou Xinsheng Electronic Technology Co., Ltd. In February 2016, the company received a bid notice from COFCO Corporation for the policy grain acquisition card system project. This marks that the company has taken an important step in the field of smart grain banks. (2) In 2015, the company successfully won the bid for the South-to-North Water Transfer - Shengfang Water Purification Plant and Pipeline Network Project Automatic Control System, marking a breakthrough in the company's automation business in the water industry. Furthermore, the company acquired 100% of Hangzhou Qingniao Electronics to enter the smart city industry. The business scope of Qingniao Electronics is the development and sale of smart systems, intelligent buildings, smart weak electricity, and intelligent security systems. We believe that the company has the core technology in the automation industry, and that industrial-grade RTU products have great advantages. The future horizontal expansion into smart granaries and smart water services has great potential for development, and is expected to become a new growth point for the company's performance. (3) Oil and gas services: Acquisition of Sanda to enter new oil field environmental protection, improve the oil service industry chain through integration of advanced technology and resources at home and abroad, develop environmental protection related businesses such as oil and gas field ground production and construction projects, process equipment manufacturing, integrated drilling and fracturing services, natural gas purification treatment, oil field, natural gas purification treatment and oil field, natural gas purification treatment, and oil field water treatment. In terms of oil and gas services, the company acquired 100% of Zetian Shenghai's shares and entered the field of oilfield drilling measurement technology services. Recently, the company has set an increase of 400 million yuan, of which 129 million yuan will be used to acquire 52.4% of the shares of Xinjiang Sanda New Technology Co., Ltd. to enter the oilfield environmental protection sector. The company previously provided RTU and other automation products in Xinjiang and other places, and has many customer resources; Zetian Shenghai and Sanda Xinzhang have formed a strong complementary business relationship with the company's traditional oilfield automation main business. Among them, Sanda has promised that 2016-2017 performance will not be less than 25.3 million and 28 million, and Zetian Shenghai has promised that 2015-2017 performance will not fall below 28 million, 33 million, and 37 million, which will help the company achieve rapid growth in performance. (4) Automation business: The main business benefits from the increase in the automation rate of domestic oilfields and equipment import replacement companies, as providers of innovative products and industry smart solutions in the field of automation, providing customers with DCS, modular RTU, integrated RTU, expanded I/O, sensors and instruments, and other automated product sales, competitive industry solutions and technical services in the fields of oil and gas, chemicals, water, intelligent manufacturing, etc. Currently, China has more than 300,000 oil and gas wells. The digitization process is slow, and the overall level of digitization is less than 30%. The Changqing Oilfield and Xinjiang Oilfield, which have the highest degree of digitization of wellheads, are only about 50% and 20%, respectively, far below the European and American average of more than 65%. According to CNPC's plan, the digital transformation of 70% of oil wells and 100% of gas wells should be completed in 2015, but in reality, the corresponding progress is far from meeting standards, and digital construction of oil and gas wells is expected to accelerate in the future. There is still a lot of room for improvement in China's oil and gas field automation penetration rate, and the expansion of the company's RTU production capacity has a lot of market space. The company's RTU products and overall oilfield automation solutions have a market share of more than 50% within the domestic three-barrel oil system, and have a good market reputation. In the past, RTU products and overall solutions within the three-barrel oil system mostly used products from foreign manufacturers. In recent years, the company's RTU products have gradually entered the three-barrel oil system and have passed a long period of oil field operation inspection, with high quality assurance. With the gradual deepening of the localization substitution process, the company's products are expected to gain a larger market share. 3. Investment recommendations We judge that the company's RTU equipment and services will maintain steady growth in the next two years, and businesses such as smart granaries, cities, and environmental protection are expected to exceed expectations. There is a strong seasonal factor in the company's performance, and performance is highly concentrated in the fourth quarter. It is estimated that in 2016-2018, the company's preparation for the EPS exam will be 0.19/0.27/0.37 yuan, respectively, and the PE exam preparation will be 57/40/29 times higher. Based on the traditional main business of oilfield RTU, the company enters smart industries such as environmental protection, smart granaries, and smart cities. It will benefit from smart industries, the Internet of Things, and environmental protection themes. It has the potential to improve its performance and maintain a “recommended” rating. Risk warning: Oil prices are hovering around the risk of a downturn in traditional business, and the risk of epitaxial development and smart industry expansion is lower than anticipated.