1. Event Overview The company published its 2016 annual report. During the reporting period, the company achieved operating income of 389 million yuan, an increase of 5.45% over the previous year; net profit attributable to shareholders of listed companies was 33.2848 million yuan, an increase of 7.39% over the previous year. Achieved a basic earnings of 0.13 yuan per share. It is planned to distribute a cash dividend of 0.25 yuan (tax included) for every 10 shares. 2. Analysis and judgment that traditional piano sales increased, category expansion, and online and offline collaborative sales promoted steady growth in performance. The company's revenue for the full year of 2016 increased 5.45% year on year, net profit increased 7.39% year on year, and performance increased steadily. The increase in operating income was mainly due to the increase in piano sales volume. At the same time, the increase in the number of musical instrument categories sold and the development of simultaneous online and offline channels further contributed to the increase in sales revenue. During the reporting period, the increase in material and labor costs affected the gross profit margin of the product. The overall gross margin fell 2.04pct to 26.31% year on year. The rise in foreign currency exchange rates, the sharp increase in investment income from investing in the art education industry and purchasing capital protection wealth management products, and the increase in government subsidies led to a further increase in net profit, and the net interest rate increased by 0.04pct to 8.52%. Online marketing investment increased sales expenses sharply. The overall cost rate for the period fell slightly. During the reporting period, the company's expenses were well controlled. The sales expense ratio increased 1.79 pct to 7.42% year on year, the management fee rate fell 1.00 pct to 12.94%, the financial expenses rate fell 0.86pct to -1.14%, and the overall cost rate for the period fell 0.07 pct to 19.22%. The increase in sales expenses is mainly due to a sharp increase in online marketing service fees; the decline in management expenses is mainly due to a reduction in R&D expenses and changes in tax accounting treatment. Offline art education investment is beginning to bear fruit. The model replication is worth hoping that the company will extend to the cultural industry chain based on piano manufacturing. It began laying out the art education and training industry in 2014, and established Helen Art Education Investment to be responsible for offline art education and training business. The art education business is mainly operated by signing cooperation agreements with local training institutions. The shareholding ratio is about 10%-18%. The curriculum system is positioned as art enlightenment, music education, art education, and dance education. A number of participating companies contributed more than 100,000 yuan in investment income to the company during the reporting period. We believe that at present, the company's offline art education investment model is quite mature, and we can look forward to rapidly expanding the scale of the art education business through the replication model in the future. Exploring new directions of development, developing smart pianos and online education platforms, companies actively explore new directions of enterprise development, strive to promote research and development of smart pianos and online education platforms, continue to deepen strategic cooperation with Beijing University of Posts and Telecommunications, transform and expand the product structure and usage functions of smart pianos through the application of modern technology, carry out online education platform research projects, and strive to integrate smart pianos with the Internet to better serve modern music education and life. At present, a new generation of smart piano products and “6+1" smart piano classroom products have been launched. In the future, the course audience will gradually expand from young children and beginners to middle-aged, young, and elderly learners, promoting the development of online education. 3. Profit Forecast and Investment Suggestions We are optimistic about the company's future performance growth space brought about by the intelligent upgrade of the company's piano products and the joint development of online and offline art education. We expect the company to achieve basic earnings of 0.15 and 0.18 yuan/share in 2017 and 18, corresponding to PE in 2017 and 18, which are 89X and 75X respectively. Maintain the company's “Highly Recommended” rating. 4. Risk warning: 1. Market expansion falls short of expectations; 2. Return on investment in art education falls short of expectations.