Incident: The company released its annual report. In 2016, it achieved operating revenue of 640 million yuan, an increase of 8.5% year on year; realized net profit of 160 million yuan to mother, an increase of 20.5% year on year. The company's performance continues a steady growth trend, and profitability is strong. The company's two major business segments are intelligent packaging equipment and plastic packaging products. Among them, smart packaging equipment achieved revenue of 470 million yuan, an increase of 12.3% year on year; plastic packaging products achieved revenue of 99 million, a year-on-year decrease of 11.3%. Nearly 90% of the company's revenue comes from the dairy packaging industry, and intelligent packaging equipment is the main driving force for the company's performance growth. The dairy packaging industry has high technical barriers and high requirements in terms of sterility and stability. The company has formed its core competitiveness through long-term technology accumulation. The company's comprehensive gross margin is as high as 49.9% and ROE is 16.5%, showing that the company has strong profitability. Liquid packaging machinery industry leaders benefit from strong downstream demand. The company has a complete product line. All kinds of equipment cover the main packaging processes such as molding, filling, sealing (sealing and cutting), and post-packaging, and have the ability to supply the entire line. Downstream industry customers include giants such as Mengniu Dairy, Yili Group, **** Dairy, Nestle, and Wahaha. Currently, China's per capita consumption of dairy products is far lower than that of developed countries. In the future, it is expected to benefit from strong demand brought about by consumption upgrades, and the overall market capacity will continue to grow. In addition, the continuous changes in packaging forms have brought about new equipment procurement requirements. Actively expand the industrial chain. The company has strong strength in the research and development of sterile, energy-efficient, and integrated equipment. In order to strengthen technical reserves, the company has successively invested in Ningbo Zhongwu Optoelectronic Sterilization Technology Co., Ltd. and Hangzhou Huicui Intelligent Technology Co., Ltd., holding 30% and 2% shares respectively. While enhancing the reserves of cold sterilization technology and visual technology, it has enhanced the overall competitiveness of the company's products and cultivated new profit growth points. We have sufficient orders in hand to guarantee 17 years of performance. According to the annual report, the company's inventory of intelligent packaging equipment increased by 55.4% year on year, and plastic packaging products increased by 30.8% year on year. Since the company's production model is based on sales, the main reason for the sharp increase in inventory is the increase in orders, which will fully guarantee the company's 17-year performance. Profit forecasting and investment advice. EPS is expected to be 0.72 yuan, 0.84 yuan, and 0.99 yuan respectively in 2017-2019, and the compound growth rate of net profit returned to mother will reach 18.2% in the next three years. The company's products have high technical barriers and broad downstream demand. We are optimistic about the company's long-term development, coverage for the first time, and give it an “gain” rating. Risk warning: Risks such as reduced downstream demand and declining gross margin.