Investment highlights: In 2016, revenue was 3.496 billion yuan, up 16.11% year on year, and net profit was 118 million yuan, down 19.43% year on year. The company was mainly hampered by the decline in gross profit from the driving school business, and there were full expectations in the early stages. The company released its 2016 annual report. During the reporting period, the company achieved operating income of 3.496 billion yuan, an increase of 16.11% over the previous year; realized net profit attributable to the parent company of 118 million yuan, a year-on-year decrease of 19.43%, corresponding to an EPS of 0.29 yuan. Among them, revenue for the fourth quarter was 1,016 million yuan, up 19.74% year on year, up 10.01% month on month; net profit attributable to parent company was 28 million yuan, up 4946% year on year, down 27.93% month on month. The corresponding EPS for the fourth quarter was 0.07 yuan. The company's revenue growth in 2016 was mainly due to automobile 4S e-sales, but the low gross profit contribution of this business was low; the decline in profit was mainly due to a 9.28 point drop in gross profit from the driving school business to 35.9%, and driving school revenue also fell 22% during the same period. The advertising and media business is still impressive. A new order may have been signed with the bus group in '17. The advertising and media business maintained a high level of gross margin, with a year-on-year increase of 0.86 percentage points to 77.74%, while revenue fell 5% year-on-year, and still accounted for 50% of the company's gross profit source. It mainly relies on car body advertising branches, lightbox advertising subsidiaries (contributing 50.15 million yuan in net profit in 2016 and 47.44 million yuan in the same period in 2015) and Shiba Media subsidiaries (mobile media advertising). The company currently operates 18,787 bus body media vehicles; 9112 bus shelter light boxes, 41,588 in-car hanging boards, 2193 outdoor stop signs, etc.; 10,933 mobile televisions on board; and 62 sets of large LED screens at stations. In 2017, the ten-year contract between the company and the majority shareholder Bus Group is about to expire, and a more competitive contract will be re-signed. Among car services, 4S stores have benefited from the release of traditional passenger cars, and the decline in driving school business has dragged down overall profits. The car service business has five main branches. The driving school subsidiary made a profit of 71.18 million yuan in 2015 and 22 million yuan in 2016. The 2016 annual report announced that driving school business revenue fell by 21.65%, and gross profit fell 9.28 percentage points. The driving school business reduced the number of driving school students due to the population control policy introduced by Beijing, which required driving school students to have a residence permit, and the driving school business of leading Oriental fashion in the industry has also declined to a certain extent; the 4S business is currently in Beijing, Shanxi, and Guangxi, representing 6 brands, benefiting from passenger car sales in 2016, 4S. Revenue has increased dramatically, but Due to its low gross profit base, its contribution to performance is limited; the car rental business has more than 800 buses, revenue increased 17.52% year over year to 54.51 million yuan, and gross profit also increased 5.51 percentage points year on year; automobile scrap and dismantling business revenue increased sharply by 34% to 26.48 million yuan, and gross profit also increased 2.03 percentage points year on year; finally, Longyuan Industry and Trade is on the verge of profit and loss. Currently, Longyuan Industry and Trade has a greater mission. As a wholly-owned subsidiary of Beiba Media, Longyuan Industry and Trade has a greater mission. As a wholly-owned subsidiary of Beiba Media, Longyuan Industry and Trade has become a new company with 40% equity Energy charging service platform. The new energy vehicle charging pile business will enter a harvest period in '17, and the capital expenditure for charging pile construction will gradually increase, serving not only public transport groups, but also social vehicles. At the beginning of 2016, the company launched a new energy charging service facility project. Construction of 20 charging stations began throughout the year, including 155 charging stations for buses and 34 for social vehicles, with a total investment of 207 million yuan, accounting for the vast majority of investment cash flow of 232 million in the purchase and construction of fixed assets. By the end of the annual report, the project had completed a total of 94%. It is expected that the project will be consolidated in 17, while the company will have larger investment plans in '17. We expect that capital expenses will gradually increase in the next few years, and the company's investment cash flow will test the overall operating situation. In 2015, the company raised 700 million dollars in capital through bonds, and currently has financial expenses of about 40 million yuan a year. The Beijing Public Transport Group's 13th Five-Year Plan is a green development concept. The number of new energy buses will exceed 11,000, and at the same time create a Beijing-Tianjin-Hebei integrated transportation development strategy. During the “13th Five-Year Plan” period, the public transport group will focus on new energy vehicles and clean energy vehicles, supplemented by Euro VI diesel vehicles with low emission standards, rationally adjust model configurations, and maintain vehicle technology and environmental emission levels at the highest level in the country. It is estimated that by 2020, about 2,000 charging stations will be built, and the number of new energy vehicles will exceed 11,000, accounting for more than 50% of the total number of vehicles; more than 7,000 LNG and CNG natural gas vehicles, accounting for 32% of the total; and more than 3,700 Euro VI standard diesel vehicles, accounting for 16% of the total. At the same time, research on the top-level design of the Beijing-Tianjin-Hebei cross-area bus network will be stepped up to expand passenger transport services to surrounding areas of Beijing in due course, and increase bus service coverage, based on the passenger transport service business in the Beijing region. Develop cross-border routes with Chengde City and Kuancheng County in Hebei Province, and encrypt traffic links between counties and cities in the Langfang region and Beijing. According to estimates, the economy of bus operation is remarkable. On the one hand, the number of hours that charging stations can be used is guaranteed, and on the other hand, Beijing has a 30% construction subsidy. In terms of revenue, the operating company mainly earns charging service fees. Currently, the charging service fee standard in Beijing is 15% of No. 92 gasoline on the electricity bill, a charging service fee of 0.895 yuan/degree. If each car travels 42,000 kilometers per year, the operating revenue of 10,000 vehicles is 38-400 million yuan. From the cost side, the operating company is mainly depreciation of construction investment. Currently, it is estimated that 200 million dollars have been invested in 189 piles. If the 13th Five-Year Plan invests 2,000 piles to serve the public transport group, the total investment is about 2.1 billion dollars, of which 30% is subsidized, and the remaining capital is amortized over an 18-year period. The approximate cost is less than 100 million dollars a year. Roughly calculated, the gross profit is plentiful. Then, if new technology such as energy storage can be applied, it also earns profit from the difference in price on the power grid side. The three major expense ratios were well controlled. Accounts receivable and inventory declined year over year, and operating cash flow declined year over year. In 2016, the company's sales expenses were 223 million yuan, up 3.6% year on year; sales expenses were 6.38%, compared to 7.16% in the same period last year; management expenses were 257 million, up 5.9% year on year; management expenses were 7.35%, compared to 8.06% in the same period last year; financial expenses of 41 million yuan, up 104% year on year, mainly due to soaring financial expenses due to the company's 15 year issuance of bond financing; asset impairment losses of 105 million yuan, a decrease of 63% year on year. In 2016, the company's advance accounts were 127 million yuan, down 21% from the beginning of this year; accounts receivable were 182 million yuan, down 4% from the beginning of the year; and inventory was 259 million yuan, which was basically the same as at the beginning of the year. In terms of cash flow, the net cash flow from operating activities was $213 million in the current period compared to 2.75 for the same period last year. Of this, the net operating cash inflow was $3.94 billion, an increase of 17% over the previous year. In line with the revenue growth rate, this also indicates that repayments are good. Profit forecast and valuation: At present, the market has certain expectations for the company's new energy bus charging station operation business. As a small ticket with a market value of more than 5 billion dollars, the valuation is not very low, but we think there are still enough gaps in expectations. First, the company currently not only provides internal services, but also constructs conventional charging piles to serve social vehicles, and competes in market-based competition with cheap land costs and electricity costs. This area has not been anticipated by the market; second, the company's position within the group. Currently, the company's business has been drastically transformed, and it has taken effect in the Group's 355 green operation business The key role, the group's resource advantages and competitive advantages in Beijing-Tianjin-Hebei transportation integration are self-evident. The listed company is the sole capital operation platform for the Beijing Public Transport Group. Under the current trend of NEV development, we believe that listed companies will undergo a beautiful transformation; third, the company's bus business profits have a certain degree of certainty, and will fall short of expectations at various time rhythms in long-term development, but it has basically locked in long-term profits in a definitive development trend. The bottom layout waiting for growth is an appropriate investment idea. Therefore, we expect net profit of 1.59/2.09/255 million yuan in 2017-2019, and EPS of 0.395/0.519/0.631 yuan, an increase of 35.3%/31.3%/21.7% over the previous year, 35 times PE in 2018, with a target price of 18 yuan, and a purchase rating of 18 yuan. Risk warning: The development of the new energy vehicle charging pile business did not meet expectations, and the company's other main businesses declined more than expected.