Incident: Black Sesame released its 2016 three-quarter report. In 3Q16, the company achieved revenue of 440 million yuan, a year-on-year increase of 38.8%, net profit of 39.146 million yuan, a year-on-year increase of 29%, and earnings per share of 0.06 yuan. In the first three quarters, revenue and net profit were 1.18 billion and 60 million, respectively. Revenue increased 13.96% year on year, net profit fell 14.3% year on year, and earnings per share were 0.10 yuan, which is in line with our expectations. Commenting on the rebound in third-quarter results, the “black nutrition, selenium food” industry development strategy is beginning to bear fruit. 1) 1Q and 2Q performance were weak, and 3Q performance rebounded markedly. The company's revenue for 1Q/2Q/3Q was 438/2.94/444 million yuan respectively. 3Q revenue was +38.8% year-on-year and +51% month-on-month, with a significant rebound. The company's net profit for 1Q/2Q/3Q was 0.22/ -0.01/039 million yuan respectively. Compared with the decline in 1Q and 2Q, net profit for 3Q increased sharply. Net sales margin was 5.47%/-0.01%/9.2% in 1Q/2Q/3Q, respectively, and there was a marked rebound in 3Q. 2) The company's profit is worry-free. Although the revenue target is under pressure, it is more likely that it will be achieved. 1-3Q16 Food Industry Revenue Estimates +10%. The fourth quarter is the peak sales season for the old product black sesame paste. It is expected to increase by 10% throughout the year, achieving revenue of 1.1 to 1.2 billion dollars. It is estimated that black sesame milk will earn more than 200 million in '16. It is estimated that the revenue of the new black dark milk product 1-3Q16 is 40-50 million, and the volume price of 4Q16 is expected to rise sharply, and the revenue is expected to be over 60 million. The rice industry has a large amount of revenue, which is expected to be over 200 million in 3Q16. During the peak sales season in 4Q, revenue is expected to reach 400 million yuan for the whole year. Black sesame equity incentives require an average revenue (food industry) growth rate of not less than 30% in 2016 to 2017, and net profit of not less than 200 million yuan and 250 million yuan. After the merger and acquisition of sesame oil was terminated, we believe that although there is some pressure to achieve the incentive, it is still quite likely that it will be completed. Expense control is efficient, and management expense rates and sales expenses rates have declined. The company spent a lot of money on promoting new black milk products in 1H16. The sales expense ratio was -0.3 pct year over year, and 4q was expected to decrease; the management expense ratio was -0.9 pct year over year, interest on current loans increased, financial expense ratio +1.8 pct, and sales tax rate +0.4 pct. The shareholding ratio of the majority n shareholders was 41.38%, and the company increased the price by 7.2 yuan/share after the restoration in 2004, which is close to the current price, taking into account capital costs and stock price inversion. Epitaxial mergers and acquisitions expand and strengthen the health food industry. In 2016, the Jinghe Rice Industry was acquired to build a selenium-rich food industry chain. The estimated revenue of Jinghe Rice Industry is about 400 million yuan in 2016, and the revenue is expected to grow by 20-30% in 2017. In 2015, it acquired 60% of Inner Mongolia's shares in Southern Saibao, and there is huge room for development after the integration is completed. The company has sufficient cash, a 500 million M&A fund, and is actively seeking foreign projects. Expectations for extended mergers and acquisitions are strong. Profit forecast and investment advice: Overall performance is expected to increase by 30%-40% in 2016: through new channel expansion and price increases, old products are expected to grow 10%, with net profit of 130 million yuan; the overall target of new products is 2-3 billion yuan, corresponding to a year-on-year increase of 30-40%; the growth rate of logistics parks is steady, with a net profit of 30 to 40 million yuan; the rice industry also has 400 million yuan, conservatively estimating net profit of 12 million yuan. We believe that the rice industry has greater potential for growth in the future. At the same time, the company has sufficient additional capital, and expectations for extended mergers and acquisitions are strong. There is a high probability that the equity incentive target of 200 million yuan will be completed. The current valuation is 24XPE. Net profit is expected to be 20 or 280 million in 16-17, an increase of 35% and 40% over the previous year. The target price is 9.6 yuan for 16 years. There is still room for 25% to maintain the purchase rating. Risk factors: New product promotion falls short of expectations, food safety issues.