Main points of investment:

The company released the three-quarter report of 2016, with a cumulative operating income of 698 million yuan in the first three quarters, a year-on-year increase of 1.60%, and a net profit of 65.08 million yuan, an increase of 26.68% over the same period last year, corresponding to EPS0.26 yuan. The operating income in the third quarter was 262 million, an increase of 15.68% over the same period last year, and the net profit was 27.04 million yuan, an increase of 29.47% over the same period last year, slightly exceeding expectations. Benefiting from the devaluation of the RMB, the company's revenue began to grow by double digits in the third quarter, while continuing to contribute to exchange earnings. We expect the company's full-year homing net profit to be close to the forecast upper limit of 30%, raising the company's 2016-2018 EPS to 0.34 EPS 0.37 yuan 0.40 yuan (0.04 pound 0.05 pound 0.06, without considering additional issuance), maintaining the "overweight" rating, with a target price of 21.08 yuan.

RMB depreciation, income increase + exchange gains two-tier benefits. The vast majority of the company's main tool cabinets are used for export, benefiting from the devaluation of the RMB, export stimulus began to drive income growth, the third quarter income growth of 15.68%, while continuing to contribute to exchange earnings (third quarter financial expenses-1.14 million). The cost of raw materials and steel rose somewhat in the second half of the year, but by a small margin, the gross profit margin remained basically stable, the depreciation of the RMB accelerated at the beginning of the fourth quarter, the growth rate of annual income is expected to accelerate, and the net profit of returning home will be close to the estimated upper limit of 30%.

It is expected that the implementation of Dingzeng is not far away, and the major shareholders help to develop by leaps and bounds. The company's announcement was approved by the Securities Regulatory Commission on August 17, and the implementation of the issue is expected to be in the near future. As the first capital market refinancing, the overall progress is rapid, on the one hand, it reflects the strong executive power of the company, on the other hand, it also shows that the company has begun to attach importance to the platform of listed companies. At the same time, the high share of major shareholders (59.87%) + external high-quality assets (Tongrun auto parts + Tongrun drive equipment), which has laid a solid foundation for the company to achieve great-leap-forward development in the future.

Catalyst: implementation of non-public offering; expected promotion of asset securitization or extension.

Core risk: asset securitization or extension expansion is blocked.