Matters: Dongan Power released an express report on production and sales data for August 2016. Comment: In August, sales at the headquarters maintained a growth rate of more than 1 times, and Mitsubishi's performance continued to be steady. In August 2016, the engine production/sales volume of Dongan Power's headquarters was 17,354 units/15234 units, up 155.47%/110.41%, respectively; the cumulative production/sales volume up to the end of August was 198,800 units/192,200 units, respectively, up 119.94%/114.25% year on year. The production/sales volume of the subsidiary Toan Mitsubishi was 22,686 units/19543 units, up 9.46%/36.10% from the previous year, respectively; the cumulative production/sales volume up to the end of August was 285,500 units/286,700 units, respectively, up 27.46%/31.39% from the previous year. In summary, Dongan headquarters continued to maintain rapid growth (115% year-on-year increase in January-July, 110% year-on-year increase in August), mainly due to downstream customer volume (especially Changan Auchan, BAIC Weiwang, etc.), and production and sales declined month-on-month, mainly due to seasonal fluctuations; Dongan Mitsubishi's sales volume showed an upward trend in August (31% year-on-year increase in January-July and 36% year-on-year in August), and also declined month-on-month (-37%) due to seasonal effects. We believe that in August, Dongan Mitsubishi's sales volume declined seasonally in line with expectations. Overall sales volume still showed a high growth trend, the headquarters maintained a growth rate of more than 1 times, and Dongan Mitsubishi continued to grow steadily, and the overall development trend was good. There was a month-on-month decline due to seasonal factors. Dongan Power's engine sales situation is closely related to the sales volume of downstream vehicle customers. July and August are low seasons for traditional car companies, which directly caused Dongan Power engine sales volume in the third quarter to be slightly lower than the market at the beginning of the year and the end of the year (see figures 1 and 2 below for the annual production and sales trend), but with the arrival of the peak automobile production and sales season in September and October, engine sales volume between headquarters and Dongan Mitsubishi is expected to improve month-on-month. The major customer Changan's performance is steady and bright, and they are looking forward to “gold, nine silver, ten.” Changan Group is one of Dongan Power's core customers. In the first half of 2016, both the headquarters and Dongan Mitsubishi had good supporting performance. Among them, the main supporting model of the headquarters is Auchan, and Auchan supplies account for nearly 40% of the headquarters's total engine sales; Dongan Mitsubishi's main supporting customers are CS35, CX70, and Onuo. These three models account for more than 50% of total Mitsubishi engine sales. Auchan is an important plan for Changan MPV, and production capacity may expand in the second half of the year. As one of Changan Onuo's MPV combo, Auchan has a clear competitive advantage and rapidly increased volume since its launch at the end of 2015. It is the brightest source of performance of Dongan Power's headquarters in 16 years, with cumulative sales volume of 76,800 vehicles from January to August (accounting for 40% of the headquarters's total supporting volume). Considering that there are currently few MPV models to choose from in China (mainly Wuling Hongguang and Baojun), making it difficult to meet market demand, Auchan, as the main model of the Changan MPV, has been highly recognized since its launch. Auchan's production capacity or expansion in the second half of the year will continue to contribute to the performance of Dongan Dynamics headquarters. CX70, CS35, and Onuo returned to the growth channel in the off-season. Changan's three main models, CX70, CS35, and Onuo, which are supported by Dongan Mitsubishi, showed good gains during the off-season. Among them, the CX70 is a new model added by Changan in 2016. The volume increased in April, and the sales volume exceeded 10,000 in June. After a sharp decline in sales in July, it returned to the growth channel in August, with a year-on-month increase of 37.6%. Meanwhile, sales of Changan's two traditional models, the CS35 and Onuo, achieved a negative market boost in August, achieving 24% and 64% month-on-month growth, respectively. We believe that with the completion of the CS35 2016 product upgrade, the CX70 sales volume stabilizing, and the “gold nine silver ten” peak season approaching, Dongan Mitsubishi is likely to maintain a growth rate of more than 25% in the fourth quarter. Production and sales maintained a high growth rate in August, optimistic about the performance throughout the year, and maintained a “buy” rating. We believe that Dongan Power's production and sales continued to grow at a high rate in August. Among them, the headquarters achieved customer upgrades through M series product replacement. The supporting volume is expected to double in 2016, and the performance in the second quarter will turn a loss into a profit; Dongan Mitsubishi has further integrated into the Changan system, sales volume of the main supporting models is steady, and the annual performance is promising. Considering that the company's 6AT products may be produced in small batches next year, we predict that the 16/17/18 EPS will be 0.37/0.47/0.59 yuan, and the corresponding PE will be 34/27/22 yuan respectively, maintaining the “buy” rating.