Key investment events: Zhangzi Island released its 2016 annual report. The company achieved operating income of 3,052 billion yuan, up 11.93% year on year, net profit attributable to shareholders of listed companies of 79.59 million yuan, up 132.76% year on year, net profit attributable to shareholders of listed companies after deduction - 27.87 million yuan (of which 41.18 million yuan and government subsidies of 30.2 million yuan), and applied to the Shenzhen Stock Exchange to withdraw the delisting risk warning. At the same time, the company announced the 2017 Q1 performance forecast, achieving net profit attributable to shareholders of listed companies of 1 million to 10 million yuan, turning a loss into a profit. The company's marine ranch resources have recovered well, and shrimp and scallop yield has recovered. In 2014-15, the company lost its performance for two consecutive years due to low fishery prices and natural disasters. After recent years of reconstruction, the company's marine ranching resources have recovered well. By industry, the company's revenue in 2016 mainly came from the aquaculture, processing and trading industries. Among them, the aquaculture trade industry achieved revenue of 1,116 billion yuan, up 38.47% year on year, the aquaculture processing industry achieved revenue of 957 million yuan, up 5.21% year on year, and the aquaculture industry achieved revenue of 901 million yuan, the same as the previous year. By product, in 2016, the yield of shrimp and scallops, the company's main product, recovered to 38 kg per mu, with a fishing area of 600,000 mu (2.4 million mu of “3+1” rounds). According to the unit price of 38 yuan/kg, it achieved revenue of 850 million yuan, while production of other varieties such as sea cucumber, abalone, and conch increased steadily. The company's operations and management have improved markedly, the expense ratio has declined sharply year over year, and the gross profit margin and net profit margin have increased year over year. The company achieved net profit of 79.58 million yuan in 2016, a sharp increase of 132.76% over the previous year. Gross sales margin was 15.13%, up 3.37 percentage points year on year, and net sales margin was 2.48%, up 11.48 percentage points year on year. The company's operations and management have improved markedly, with sales and management expenses falling by about 70 million yuan year on year, including sales expenses of 177 million yuan, accounting for 5.80% of operating income, a year-on-year decrease of 1.57 percentage points; management expenses of 163 million yuan, accounting for 5.34% of operating income, a year-on-year decrease of 2.36 percentage points; and financial expenses of 139 million yuan, accounting for 4.55% of operating income, a year-on-year decrease of 1.64 percentage points. The company's non-operating income was 79.2 million yuan, including wind index insurance claims of 42.17 million yuan. Relying on marine ranching resources to expand to the downstream food side, the company's performance is expected to grow steadily over the next two years. With the increasing improvement of marine ranch management, we expect the company's shrimp and scallop yield to reach 60 kilograms per mu in the next two years. Based on an estimated gross profit of 20 yuan per kilogram, it can provide the company with a gross profit of about 700 million yuan. At the same time, the company's downstream omnichannel layout continues to improve, and international market orders are gradually increasing. Food and cooking products, such as garlic vermicelli, breading squid rings, and black pepper salmon, etc., will inject new vitality into the company's future food-side development. The company's 2016 performance reversed and turned a loss into a profit, and there were no other delisting risk warnings. We believe that the application to the Shenzhen Stock Exchange to remove the cap this time is expected to be successful. In the long run, whether it is a return to profit from the original business or an extension breakthrough after removing the cap, it is worth looking forward to. If the target is reversed at the bottom, it is recommended to continue to pay attention. We expect the company's net profit in 2017 and 2018 to be 204 million yuan and 318 million yuan, with EPS of 0.29 and 0.45 yuan respectively, giving it 30XPE in 2018 and a target price of 13.5 yuan, maintaining the “increase in holdings” rating. Risk warning: Risk of fluctuations in aquaculture prices; uncertainty in the natural conditions of the ocean.