Notice: On the evening of February 15, 2017, Yingtang Intelligent Control released the 2016 annual report and the results forecast for the first quarter of 2017. In 2016, the company achieved revenue of 4.222 billion yuan (138.35% YoY), net profit attributable to shareholders of the parent company of 201 million yuan (435.50% YoY), and plans to distribute a cash dividend of 1.20 yuan for every 10 shares. The performance forecast for the first quarter of 2017 shows that net profit to mother was about 23 to 28 million yuan, a year-on-year decrease of 66.65%-59.4%. Ping An's view: The 2016 performance surged more than fourfold, and the net operating profit doubled in the first quarter: Yingtang Intelligent Control achieved revenue of 4.222 billion yuan in 2016, an increase of 138.35% over the previous year, and net profit attributable to shareholders of the parent company was 201 million yuan, an increase of 435.50% over the previous year. Mainly due to the following points: 1) The company's transformation into a distributor saw initial results, and Huashanglong's inclusion in the merger, expanded and optimized component product lines and customers, and strengthened the layout of customers in industries such as smart chips, new energy vehicles, security, and intelligent rail transit; 2) The company increased its external resource integration efforts and strengthened internal management such as cost control, order management, and organizational optimization. The ratio of management expenses to turnover decreased by 47.76% year on year; 3) The company's equity transfer in the first quarter of 2016 brought about an investment income of about 60 million yuan. The performance forecast for the first quarter of 2017 shows that net profit to mother was about 23 to 28 million yuan, a year-on-year decrease of 66.65%-59.4%. After excluding investment income for the first quarter of '16, the company's operating net profit increased 115.09%-161.85% year-on-year. Mergers and acquisitions integrate the distribution industry to strengthen industry leadership: After completing the integration of Huashanglong, the company announced in-depth cooperation with Baijian Electronics on May 5, 2016. Baijian Electronics is an important agent and partner for internationally renowned IC brands (Lou's, MicroChip, ISSI, Winbond, Diodes, etc.) in mainland China and Hong Kong. On June 24, 2016, Huashanglong increased the capital of Shenzhen Hiworth, subscribed 60% of Shenzhen Hiworth's shares, and became the controlling shareholder of Shenzhen Hiworth. In 2016, Hiworth's revenue reached more than 1 billion yuan, and will continue to grow rapidly in the next few years. Its products are mainly capacitive touch screen drivers, gravity acceleration, magnetic sensors, gyroscopes, fingerprint sensors, and many other products with broad market prospects. On November 21, 2016, the company established a long-term partnership with Shenzhen SKY Technology Co., Ltd. and SKY Technology (Hong Kong) Co., Ltd. The main products of SKY are conductors and semiconductor products from Sunplus, MPS and Sanken, which are mainly used in home appliances, consumer electronics and industrial manufacturing. On January 21, 2017, the company plans to acquire 48.45% of Lianchuangtai's shares for HK$48.45 million. United Chuangtai is an authorized distributor of electronic component products with rich agency distribution experience. It is currently the supplier of MTK, the world's second-largest main control chip brand, and SK Hynix, the world's second-largest memory device. The company's continuous integration in the distribution industry has enhanced the company's comprehensive business capabilities, and greatly enhanced the enterprise's industry competitiveness and the company's industry leadership position. The company plans to repurchase shares, showing long-term value: At the end of January, the company's shares declined continuously. Based on management's recognition of the company's future prospects and company value, and in order to improve the profitability of the company's assets and protect investors' interests, the company plans to repurchase no more than 400 million yuan of shares at a price of no more than 10.32 yuan/share. If fully repurchased, it is expected to account for 3.62% of the total share capital. Prior to that, the company announced the completion of the employee stock ownership plan on June 20, 2016, and purchased 20.81 million shares through the secondary market, accounting for 1.945% of the company's share capital. The average purchase price was 10.065 yuan, for a total purchase of 209 million yuan. The company has successively carried out employee stock ownership and share repurchases in this price range, demonstrating the company's confidence in future development and highlighting long-term value. Investment Strategy: Yingtang Intelligent Control's transformation distributor saw initial results. The results achieved high growth in 2016, integrating and absorbing many high-quality brands such as SK Hynix, MTK, Lou's, Dexin, Microchip, Huiding, and Sanken in the distribution sector. At the same time, employees bought shares in the secondary market at an average price of 1,065 yuan in 2016. Currently, 400 million yuan share repurchases are being actively promoted, demonstrating the company's confidence. We expect the company's revenue in 2017-2019 to be 50.99/56.09/6.170 billion yuan, respectively, and net profit to mother will be 2.46/2.66/ 297 million yuan, respectively. The corresponding EPS will be 0.23/0.25/0.28 yuan, and the corresponding PE will be 40/37/33 times, maintaining the “recommended” rating.