Main points of investment

In 2016, the company achieved operating income of 1.767 billion yuan, an increase of 45.77% over the same period last year. Quarterly, Q1, Q2, Q3 and Q4 revenue increased by 15.14%, 51.45%, 186.42% and 40.59% respectively compared with the same period last year. Since the beginning of Q2, the company's revenue growth has entered an inflection point, and Q4 revenue has reached the highest level in the history of a single quarter. The export of complete sets of equipment and project contracting, general trade and overseas operating income increased by 47.50%, 73.00% and-34.86% respectively compared with the same period last year.

In 2016, the company's comprehensive gross profit margin was 11.62%, down 7.85% from the previous year. Q4's gross profit margin fell sharply in a single quarter. The sharp decline in gross profit margin led to a sharp decline in net profit margin compared with the same period last year. The gross profit margin of Q1, Q2, Q3 and Q4 increased by 1.27%,-15.29%, 1.09% and-10.55% respectively compared with the same period last year. Q4 gross profit margin changed and declined sharply. We believe that the decline in Q4 gross profit margin is mainly due to the concentrated cost recognition in the early stage of the project. The gross profit margin of the company's complete equipment exports and project contracts decreased by 9.02% compared with the previous year, which partly confirms our conjecture. It is worth noting that the sharp decline in the company's gross profit margin is the main reason why the company's net profit growth rate (- 25.03%) is much lower than that of revenue growth (45.77%).

In 2016, the company's period expense rate was 3.72%, down 0.88% from the previous year, mainly due to the fact that the growth rate of expenses was lower than that of income. The company's exchange gain confirmed 53 million yuan, which is in line with the forecast in our in-depth report. The company's asset impairment loss accounted for 0.53% in 2016, down 0.5% from the previous year, mainly due to the reduction in inventory price loss, which is in line with the forecast in our in-depth report.

The company's net operating cash flow per share in 2016 was-1.39 yuan, an improvement over the previous year, mainly due to the increase in the settlement of complete sets of projects received in the current period.

Earnings forecast and rating: the company's EPS from 2017 to 2019 is expected to be 0.50,0.62,0.75 yuan respectively, and the corresponding PE is 48.1,38.5 and 31.9 times respectively, maintaining the "overweight" rating.

Risk hint: the order effective progress is not as expected, the order construction progress is not as expected, and the exchange rate fluctuation risk