Key investment points Business performance declined due to a decrease in the number of tenders on the State Grid. Weisheng Group (3393.HK)'s operating performance in 2016: operating income fell 12.2% year on year to RMB 2.6 billion (same below); gross profit decreased 8.9% year on year to $817 million; gross margin level increased to 31.32% from 30.18% year on year; net profit decreased 27.01% year on year to $300 million, earnings per share was 30 points, down 12 points year on year, and final dividend of HK$0.24 per share (HK$0.24 in 2015). The decline in operating performance in the current period was mainly due to a decline in sales revenue due to a decline in the bidding volume of the State Grid. Revenue fell 12.2% year on year; the year-on-year increase in various expenses resulted in a 27% decrease in net profit, such as a sharp increase in financing costs. ADO's performance increased markedly, with electricity metering AMI and communication and fluid metering AMI declining. Intelligent power distribution ADO's business grew by 20.71%, mainly to seize the demand opportunities for intelligent distribution grids in rail, new energy, and data centers. Electricity metering AMI business and communication and fluid AMI both recorded declines, with year-on-year declines of 17.13% and 19.44%, respectively. We believe that the decline in tenders for smart meters on the State Grid and the slow supply of smart meters are affecting business growth. Actually, this is because the penetration rate of smart meters in China has already exceeded 60%, and the next generation of smart meters has not yet entered the tender. Actively carry out business adjustments, and it is planned to split off part of the business and go public on the A-share market. A shares have a relatively high valuation and financing advantages. The company plans to spin-off the fluid metering business and go public on A shares. On the one hand, it complies with government policy calls to increase the corporate financing platform; on the other hand, it can open up space for mergers and acquisitions, so enterprises can grow rapidly. Our view: Weisheng Group's performance declined due to the decline in the bidding volume of power grid companies, and its business operations were under some pressure. The company is currently actively making business adjustments and plans to spin-off some of its businesses and list it on A-shares; at the same time, it is adjusting its customer structure to vigorously expand overseas business and ADO business for intelligent power distribution. Currently, the company's stock price corresponds to the 2016 performance of 12 times PE. Investors are advised to pay close attention to the bidding situation of the State Grid's next-generation smart meter. Risk warning: Power grid bidding volume has decreased, orders have declined; overseas business expansion has fallen short of expectations.