Event: according to the company announcement, Jingxing Paper plans to grant 38.5 million restricted shares to a total of 78 incentive targets at a price of 3.43 yuan per share, accounting for 3.52% of the total share capital. Of these, 35 million shares were granted for the first time, and 3.5 million shares were reserved (accounting for 9.09 per cent of the total number of shares in the incentive scheme). The shares granted are unlocked in two phases. The unlocking conditions are based on the income of the main business in 2016, which will increase by no less than 10% in 2017, or the net profit in 2017 will not be less than 350 million yuan. Based on the income of the main business in 2016, the revenue of the main business will increase by no less than 10% in 2018, or the net profit in 2018 will be no less than 390 million yuan.

The equity incentive plan is deeply bound to promote the cohesion of the management team. The company's incentive targets are mainly 78 directors, executives, middle management and core technical business personnel. The proportion of lifting restrictions in each period is 50%, and the assessment year of lifting restrictions is three fiscal years from 2017 to 2019. According to the specific distribution of the incentive plan, Wang Zhiming, director and general manager, received 460 shares (11.9% of the target, 0.42% of the total), and 6 senior executives, including GE Haihua, Wang Weimin, chief financial officer and Dong Mi, each received 1 million shares (2.6% of the target). Accounted for 0.09% of the total), the remaining 71 middle-level and core technical business personnel received a total of 24.4 million shares (63.4% of the target, accounting for 2.23% of the total). The production and operation of the company is mainly based on production and technical personnel, accounting for 66.4% and 12.9% respectively, so improving team management ability and motivating technical business personnel will help to enhance the cohesion of the company and release operational vitality.

The price of containerboard paper increases and profits improve, contributing to the flexibility of the main performance. The supply and demand situation of containerboard has improved, and the improvement in profitability reflects the performance flexibility. The demand-end box board corrugated industry benefits from the outbreak of e-commerce demand; the supply side benefits from the strengthening of environmental protection and the elimination of backward production capacity, resulting in increased industry concentration. 2016Q4 in the waste paper, coal, freight and other cost side of the background of the rapid rise, the original paper mill low inventory, downstream packaging industry dispersion (CR10=8%) so that the leading bargaining power, costs through the rapid transmission of sustained price increases, tons of gross profit and ton net profit significantly improved, promoting the company's 2016 performance better than expected (see our previous report comments "Jingxing Paper Industry performance revision comments: container board corrugated industry supply and demand form improvement The performance of Q4 exceeded expectations. 17 years of containerboard industry boom is expected to continue high, the company's 1.2 million tons of containerboard production capacity will further release the main performance flexibility.

Household paper to strengthen brand publicity investment, is expected to become another growth bright spot. The company's previous project of raising and investing household paper has all been put into production, most of which are base paper sales, a few of which are self-branded and branded production, and the current output is about 50,000 tons. Its own brand "Pinxuan" will develop in a high-end direction in the future, including a series of products for women and babies, which will enhance profitability through product upgrading and brand investment.

Investment income contribution performance safety pad. The company currently holds shares in listed companies with a total market value of about 800 million yuan. In the future, the company may choose an opportunity to sell relevant shares, contribute investment income, and become a performance safety pad in the next few years.

Benefiting from the improvement in supply and demand of box board corrugated paper, the company's profit per ton has improved significantly and is expected to maintain a relatively high level in 2017. Of the 320 million net profit in 2016, nearly 100 million contributed to the main paper industry, and the rest were non-recurrent profits and losses such as investment income. We maintained that the net profit contribution of the main paper industry in 17-18 years was 350 million, 420 million, regardless of other non-recurrent profits, the EPS was 0.32 yuan and 0.38 yuan respectively in 17-18 years.