Main points of investment:

2016 results are in line with expectations:

In 2016, the company recorded operating income of HK $1.63 billion, up 1.3% from the same period last year; gross profit margin for the period was 28.1%, up 2% from the same period last year; profit attributable to owners was HK $210 million, up 9.7% from the same period last year; earnings per share were HK $0.25, with a proposed final dividend of HK $0.14 per share, with a dividend payout ratio as high as 56.3%. On the whole, the company's expenses are properly controlled and the net profit is in line with our previous expectations.

The utilization rate of mold manufacturing capacity is high, and the gross profit margin is expected to be further improved:

In terms of business, the revenue of the company's mold production division was HK $630 million, an increase of 7.2% over the same period last year, and the division's gross profit margin was 28.4%, an increase of 3 percentage points over the same period last year. The revenue of the injection molding components manufacturing division was HK $995 million, down 2.2% from the same period last year; the division's gross profit margin was 27.8%, an increase of 1.4% year-on-year. In the future, we expect the revenue of the mold manufacturing business to continue to increase slightly, and the gross profit margin is expected to reach 30% as capacity utilization continues to improve. In the injection molding business, the company successfully obtained orders for parts of new models from smartphone customers, while the smart home business also brought certain performance increments to the company's injection molding division, which is expected to achieve a revenue growth rate of more than 10% in 2017. gross profit margin remains stable.

With the increase in the proportion of the automobile industry, the income of smart homes will increase in the future:

In terms of downstream industries, revenue from the automotive industry accounted for 23.8% of the company's revenue, up 5% from the same period last year; revenue from commercial communications equipment accounted for 23.0%, up 3.6% from the same period last year; revenue from mobile phones and wearable devices accounted for 18.2%, down 2.5% from the same period last year Revenue from smart homes accounted for 5.6%, up 0.7 percentage points from the same period last year. With the rapid development of smart home industry, the proportion is expected to continue to increase in the future.

Maintain the recommended rating with a target price of HK $2.8:

We forecast that the company's EPS for 2017-2019 will be HK $0.28,0.31 and HK $0.35 respectively, and the company will be given 10 times PE in 2017, equivalent to a target price of HK $2.80, which is 17.6% higher than the current price and maintains the recommended rating.