Incidents: The company recently released its report for the third quarter of 2016. In the first three quarters, the company achieved revenue of 208 million yuan, down 24.43% year on year; net profit attributable to shareholders of listed companies was 2.09 million yuan, up 150.92% year on year; and net profit after deducting 980,000 yuan, up 177.02% year on year. Achieve basic earnings of 0.0063 yuan per share. Among them, the third quarter achieved revenue of 54.47 million yuan, a year-on-year decrease of 30.43%; net profit attributable to shareholders of listed companies was 818,500 yuan, up 93.87% year on year, net profit after deducting non-net profit of 1,218 million yuan, up 91.02% year on year. Key investment points: The company's third-quarter revenue fell slightly below expectations, gross margin recovery continued, and overall net profit remained basically stable at the profit and loss line. The fourth quarter is still promising. Affected by the continued low level of international crude oil prices, oil companies' capital expenditure is still at a low level. The company's oilfield equipment sales revenue in the first three quarters recorded 129 million yuan, a year-on-year decrease of 31.63%. At the same time, the share of equipment business revenue also fell to 62.32%. Oilfield services revenue declined only slightly by 8.39%. Oil and gas sales revenue also declined slightly by 0.45%, but these two businesses were the main sources of net profit year over year. In terms of gross margin, the company began a year-on-year recovery in the second quarter. The third quarter reached 37.97%, a year-on-year increase of 15.90 percentage points, a record high since recent quarters, and the fourth quarter is still promising. After the frozen production agreement is reached, an upward shift in the focus of oil prices will boost performance. On September 28, OPEC reached a preliminary agreement on frozen crude oil production, agreed to cut production slightly, freeze crude oil supply at the level of 32.5-33 million b/d, and will continue to decide on specific production reduction plans in November. In the long run, we believe that if a frozen production agreement is reached, the crude oil supply balance will continue to improve, the focus of oil prices is expected to increase further, and the increase in oil prices will directly benefit the company's oil and gas resources. Coupled with seasonal factors in the company's performance, the company's fourth quarter results will improve significantly. A determined increase in oil field environmental protection business is expected to occupy a strategic position in emerging environmental protection markets. The company plans to invest an additional 540 million yuan for the oil and gas field environmental protection equipment production research and development base construction project to improve the production and service capacity of vehicle-mounted environmental protection equipment for mud without landing and fracturing to return liquid. Waste mud from drilling is one of the main sources of pollution in the oil and gas industry. Drilling teams are using more and more oil-based mud, water-based mud, and composite mud. The resulting increase in costs and environmental pollution problems are becoming more and more serious, and the demand for environmental protection is showing. The company's aggressive layout at this time has taken the lead. The merger and acquisition business is progressing smoothly: entering the post-nuclear power market, there is a lot of market space; the acquisition of part of Stan Instruments shares has obvious synergy. The company subscribed to CNNC Jiahua with no more than 50 million yuan of additional registered capital of 10 million yuan, accounting for 25% of the total share capital after the capital increase, and officially entered the post-nuclear power market. CNNC Jiahua is the only enterprise in Gansu Province that holds manufacturing licenses for military nuclear and civil nuclear equipment and related confidential qualifications. The “13th Five-Year Plan” of China's nuclear power construction will reach another peak. According to the “Strategic Action Plan for Energy Development (2014-2020)”, it is expected that during the “13th Five-Year Plan” period, China will build new nuclear power plants at a rate of 6-8 per year. The approval of new nuclear power projects is expected to reach a new peak. The capacity of units under construction and operation has increased to about 8800 GW, and the increase during the “13th Five-Year Plan” period far exceeds that of the previous 30 years. Due to the limited storage capacity of nuclear waste, in the next 5 years, China will build 5 national-level medium and low emission treatment plants, and within 10 years, 2-3 high-emission treatment plants will be built, so there is a lot of space in the post-nuclear power market. Furthermore, the company recently successfully acquired 27.82% of Stan Instruments shares. After the integration was completed, there were obvious synergies in fields such as intelligent instruments and Utiana Big Data, and the company's integrated oilfield operations progressed smoothly. Maintain a “Recommended” rating. The company's 2016-2018 EPS is estimated to be 0.09 yuan, 0.18 yuan, and 0.27 yuan respectively. Based on the closing price of 12.07 yuan on October 26, 2016, the valuation values are 139.00 times, 68.64 times, and 44.23 times, respectively. The company's transformation business is more imaginative and maintains the “recommended” rating. Risk warning. International oil prices fell short of expectations; progress in oilfield environmental protection business fell short of expectations; and merger and acquisition business performance fell short of expectations.