Key Investment Highlights Blue Ocean Huateng announced its 2016 annual report and 2017 quarterly report: In 2016, it achieved operating income, net profit to mother, net profit after deducting net profit of 678 million yuan, 155 million yuan, and 153 million yuan respectively, with year-on-year increases of 118.79%, 118.88%, and 116.36%, respectively. The first quarter of 2017 achieved operating income, net profit attributable to mother, net profit after deducting net profit of 134 million yuan, 35 million yuan, and 35 million yuan respectively, with year-on-year increases of 56.65%, 34.01%, and 33.35%, respectively. Both the annual report and the quarterly results were in line with expectations. Electric vehicle electronic control grew rapidly, and the gross profit of price cuts was slightly squeezed: electric vehicle motor controllers were 165.44% compared to the same period in 2016. The off-season in the first quarter of '17 was not easy, and still maintained a relatively rapid growth rate of more than 50%. The company switched from focusing on bus electronic control and steering wheel gravity control, etc., compounding the impact of declining subsidies to push the industry to reduce costs. Product prices fell 5%-10% year-on-year in 2017, and the comprehensive gross margin for the first quarter of '17 also fell to 45.67% from 48.98% in the same period last year. In the future, while maintaining the steady growth of motor controllers for new energy buses, the company will increase production and sales of motor controllers for special vehicles such as pure electric logistics vehicles, and make technical reserves for motor controllers for passenger cars. The industrial control industry has clearly recovered, and traditional business is developing steadily: benefiting from the recovery in overall demand in the industrial control industry, medium and low voltage inverters have recovered by +15% compared to the same period in 2016, which is a clear recovery compared to 15 years (-24%). Servo control products were +26.5% year over year, and the rebound was more obvious than in 2015 (-35.4%). The recovery continued in the first quarter of 2017, and the industrial automation product line is expected to grow at a rate of 20%-30% throughout the year. Profit forecast: We believe that the company will benefit from the explosion of the new energy vehicle industry. EPS is estimated to be 2.04, 2.71, and 3.60 yuan in 17-19, corresponding to PE of 35, 26, and 20 times, respectively, and an increase in holdings ratings. Risk warning: New energy vehicle promotion progress falls short of expectations, and fund-raising projects fall short of expectations.