Key investment events: The company released its 2016 annual report and the 2017 quarterly report. The company's 2016 revenue was 1,277,857,631.81 yuan, up 14.36% year on year; net profit was 27,163,110.53 yuan, down 45.57% year on year; the company's revenue for the first quarter of 2017 was 147,583,909.68 yuan, down 5.99% year on year; net profit - 26,722,137.80, which was basically the same as the same period last year. R&D expenses, asset impairment losses, and equity incentive expenses increased, and the company's profit declined: The company's operating conditions in 2016 were relatively good. The gross margin level of various business lines, such as DC power supplies, high-voltage inverter and energy-saving businesses, AC power supplies, and secondary power supplies, all achieved a certain increase in revenue, and revenue growth of 14.36%, which is also within a reasonable range. The main reasons for the serious decline in the company's profit level in 2016 are several aspects: 1. Increased investment in R&D to develop several new products such as charging piles and on-board power systems to enter the NEV market; 2. Due to prudent considerations, asset impairment was increased by more than 10 million yuan; 3. After completing the third phase of equity incentives, certain equity incentive expenses were incurred. We believe that the company's overall operating fundamentals did not deteriorate in 2016, and that the decline in profit was temporary. The company's loss situation in the first quarter of this year was the same as the same period last year. This is a seasonal fluctuation, and profits will resume after the second quarter. Overseas business development has exceeded expectations, and the company's overseas layout has entered a harvest period: the company's overseas sales revenue in the first half of 2016 reached 608.04 million yuan, annual overseas revenue reached 175 million yuan, and the annual growth rate was 43.05%. Growth has entered a period of acceleration, and the growth rate is 30 percentage points higher than the domestic market. While the domestic market is under pressure to grow, the development of overseas markets has successfully injected new impetus into the company's development. The company will continue to promote overseas business development: 1. Set up an Indian subsidiary in India to achieve localized sales and production; 2. Establish local sales representative offices in Southeast Asia and African regions and countries to vigorously expand the South Asian, Southeast Asian and African markets; 3. Strengthen cooperation with well-known European and American telecommunications companies, increase sales share in the European and American markets, and continuously enhance the company's competitiveness. The gross margin of the company's overseas business increased by 5.02 percentage points last year, indicating that the company no longer relies on a low price strategy to compete for the market, and that overseas business will contribute more profits. Mass production of new energy vehicles was achieved during the year, moving from loss to profit: In order to accelerate the development of the new energy vehicle business, the company established a new electric vehicle business line in 2015. It has completed the formation and operation of a high-quality technical team, specializing in motors and drive systems. At present, the 18kW ultra-high efficiency AC asynchronous motor and its driving system and the 60kW permanent magnet synchronous motor and its driving system have been successfully developed. The maximum efficiency of the motor has reached 94% and 97% respectively, clearly surpassing the level of similar products in the industry and reaching the top level in China. It is expected that the company will achieve mass production of related products in the year, and the electric vehicle business will shift from losses in 2016 to continuous profit, contributing new growth points to the company. Profit forecast and investment rating: The company's 2017-2019 EPS is expected to be 0.18 yuan, 0.25 yuan, and 0.31 yuan, corresponding to PE 56/38/32 X. We are optimistic about the company's development in overseas markets and the increase in revenue and profit brought about by the NEV product line, and give it a “buy” rating. Risk warning: The development of the communication power supply industry falls short of anticipated risks, overseas business development falls short of expected risks, mass production progress of new energy vehicle motor drive system products falls short of anticipated risks, and customer development of new energy vehicle business falls short of anticipated risks.