In terms of inconsistency with the forecast, Xinshida announced that after closing on March 30, revenue/net profit for the full year of 2016 was RMB 2,727 million yuan/171 million yuan respectively, up 81%/down 10% year-on-year, 15% higher/16% lower than our previous full-year forecast. The implied fourth-quarter revenue/net profit growth rate was +78%/-64%. Key points: 1) Gross margin dropped significantly by 6 percentage points to 25%, lower than our pessimistic forecast (28%). The profit margins of the elevator control business/industrial robot business fell 5/8 percentage points year on year, respectively. The reason was that the price reduction was higher than normal due to increased competition in the local market. 2) The sales management expense ratio decreased by 8 percentage points year on year (17.2% in 2016 and 25.3% in 2015), mainly due to stagnant R&D expenses, which fell by nearly half to 5.4% from 9.2%. We believe that if the company pays more attention to the robotics business in the future, then the decline in sales management expenses will not be sustainable. 3) Elevator-related revenue fell 15% year on year, while sales revenue of the three major domestic elevator manufacturers fell 9% year on year, and China's elevator production increased 2% year on year in 2016, implying that the company's market share continued to decline. 4) The emerging industrial robot business grew steadily, accounting for 64% of total revenue in 2016. However, we believe it is putting downward pressure on overall gross margin because 21% of this segment of the business was below average in 2016 (overall gross margin was 25%). Investment impact We lowered our 2017-19 earnings per share forecast by 3-7% to reflect declining profit margins. We also rolled our 12-month price target based on EV/GCI vs. CROCI/WACC to 2018. Our new target price is RMB 9.2 (down 5% from the previous 9.7 yuan), which is still 20% off the 3.1 times valuation ratio. Risks include better-than-expected integration of the robotics business and improved profit margins.