Event: on October 24, 2016, Liaoning Chengda released its 2016 Quarterly report. The company's operating income in the first three quarters of 2016 was 6.1 billion yuan, down 7 percent from the same period last year, and the net profit belonging to shareholders of listed companies was 900 million yuan, down 43 percent from the same period last year.

Liaoning Chengda expands its financial layout through fixed growth. On August 10, 2016, the company announced a revised plan to issue no more than 320 million shares to state-owned companies, Giant Investment, Jinhui Capital Management and China Europe Logistics, and raise no more than 5.38 billion yuan to acquire 19.595% of China Holdings. Before the acquisition, the company's financial services sector was mainly equity investment and industrial fund management in GF Securities Co., LTD.. After the completion of the acquisition, the company's financial services sector will increase equity investment in insurance business, which is conducive to the integration of the company's financial resources and promote the integration of industry and finance.

China Insurance maintains high-speed development with the help of the state-owned background. (1) the performance of China Insurance maintains a high growth rate. China Holdings is a comprehensive insurance and financial group integrating property insurance, life insurance and asset management. In the first half of 2016, the total assets of China Holdings reached 62.3 billion yuan, an increase of about 13% over the end of 2015, achieving a steady increase. In 2015, China Holdings achieved a net profit of 2.35 billion yuan (up 30% over the same period last year) and insurance business income of 39.5 billion yuan (up 13% over the same period last year). Maintain a high growth rate. At the same time, the return on net assets of China Insurance reached a high level of 18.7% in 2015. (2) the state-owned advantage of China Insurance will be beneficial to the development of the company. The largest shareholder of China Holdings is Oriental assets, and the second largest shareholder is China Insurance Fund, both of which are state-owned, have strong capital and platform advantages, and play a positive role in extending the product line of China Holdings. At the same time, it can provide rich resources for the development of China Holdings.

GF Securities Co., LTD. accounts for more than 90 per cent of profits. The company's shareholding in GF Securities Co., LTD. is 16.4%, making it GF Securities Co., LTD. 's third largest shareholder. In the first half of 2016, GF Securities Co., LTD. made a net profit of 4 billion yuan and contributed 660 million yuan to Liaoning Chengda's investment income, accounting for more than 90 percent of the net profit.

Liaoning Chengda develops multi-business. In terms of biopharmaceuticals, the revenue and profits of the business remained stable in the first half of 2016 compared with the same period last year, with a total profit of 280 million yuan. It is expected that the profits of the company's biopharmaceutical business in 2016 will be basically the same as those in 2015; in the oil shale business, due to the sharp drop in international oil prices, the growth rate of the company's oil shale business slows down, and the total profit is negative. In terms of trade circulation business, in the first half of 2016, Chengda Fangyuan sales increased by 21.1% compared with the same period last year, with a total profit of 22.81 million yuan. It is expected that the annual business income of trade circulation business will develop steadily.

Investment advice: buy-An investment rating, 6-month target price of 22.7 yuan, 2016-2018 EPS is 0.54,0.66,0.72 yuan respectively. Due to the macroeconomic downturn and the sharp fall in international crude oil prices, the company's operating income and net profit have declined. It is expected that the growth of the company's financial business, trade circulation business and biopharmaceutical business in 2016 will lead to a rebound in the company's performance. we expect operating income to grow by 2%, 3% and 3% respectively from 2016 to 2018, taking into account the contribution of China Insurance to net profit. The company's net profit growth in 2016-2018 was 95%, 22% and 9%, respectively.

Risk hints: market risk, macroeconomic downside risk exceeding expectations