Events: In 2016, Dongxing Securities achieved operating income of 3.6 billion yuan (YoY -33%), net profit of the parent company of 1.4 billion yuan (YoY -34%); in the first quarter of 2017, it achieved operating income of 720 million yuan (YoY +7%), and net profit of the parent company of 300 million yuan (YoY +8%). In 2016 and the first quarter of 2017, the company's annualized weighted average ROE was 9.1% and 6.5%, respectively. The brokerage business is fully deployed, and credit performance is expected to improve. (1) Brokerage business strengthens online and offline two-wheel drive. In 2016 and the first quarter of 2017, the company achieved net revenue of $1.06 billion (YoY -56%) and $200 million (YoY -29%) in brokerage securities trading fees and commissions, respectively, and the year-on-year decline narrowed. According to Choice statistics, the company's stock market share in the first quarter of 2017 was 1.01%, which has remained stable for the past three years; according to estimates, the company's commission rate in 2016 was 0.029% (YoY -1.3BP), which is lower than the industry average. The company strengthened its online and offline layout. The online company set up the Internet Finance Department and launched products such as the robot investment app and the “Dongxing 198” comprehensive app. In 2016, nearly 93% (YoY +9pc) of new customers opened accounts through mobile phones; offline will continue to set up nearly 30 new branches in Guangzhou and other places in the future. With the joint promotion of intelligent online investment platforms and physical sales departments, superposition companies accelerate their transformation into wealth management and investment and financing intermediaries. The company's brokerage customer base is expected to expand and commission rates remain stable. (2) Stock pledges are growing rapidly, and performance is expected to improve. In 2016, the company's credit business was clearly divided, and the balance of securities financing fell back to 9.5 billion yuan (YoY -27%); the balance of the company's stock pledge business to be repurchased increased to 21 billion yuan (YoY +63%), achieving interest income of 220 million yuan (YoY +182%), maintaining rapid growth. However, the company's leverage ratio is high (3.3 times in 2016). In 2016, the company added 10.6 billion yuan in debt and financing, and interest expenses reached 1.96 billion yuan, causing the company's net interest income to lose 390 million yuan. However, with fixed capital supplements, the recovery of the two finance businesses, and the increase in stock pledge business, the loss margin gradually shrank. Interest income in the first quarter of 2017 lost only 0.3 billion yuan (loss of 180 million yuan in the same period in 2016). It is expected that the repurchase balance of the company's stock pledge repurchase business will maintain an increase of about 50% in 2017. The two finance businesses will continue to pick up, and the performance of the credit trading business is expected to improve. The investment banking business relies on shareholder advantages to achieve a diversified business layout. In 2016 and the first quarter of 2017, the company achieved net income of $830 million (YoY +19%) and $170 million (YoY -15%) from investment banking business fees and commissions, respectively. The company's investment banking business has changed from relying mainly on IPO project revenue in the past to a diversified development pattern such as IPOs, additional issuance, mergers, acquisitions and restructuring, the New Third Board, and corporate bonds. As of the end of 2016, the company was reviewing 5 IPO sponsorship projects and 12 refinancing sponsorship projects under review, demonstrating the ability of the investment banking business to grow sustainably. In 2017, the company will continue to increase investment in IPO business, and rely on major shareholders' resources and existing reserve projects to create “investment+financing+investment banking” comprehensive financial services for customers. Investment banking business performance is expected to maintain steady and rapid growth. Self-operating income is leading, and asset management products are abundant. (1) Self-employment earnings lead the industry. The company's investment income in 2016 (including income from changes in fair value, but excluding investment income in joint ventures) was 1.7 billion yuan (YoY -15%), and the average yield of proprietary business was 8.1%, which is a high level among listed brokerage firms; investment income in the first quarter of 2017 reached 300 million yuan (YoY +13%), achieving positive year-on-year growth. In 2016, the company's self-operated business structure became richer, adding monetary fund market-making business. Equity investment formed a diversified income pattern dominated by fixed growth, secondary market investment, and quantitative investment, supplemented by new shares, major transactions, and collaborative business. The fixed income category adopted measures such as reducing leverage and duration ahead of schedule. The diversified investment structure contributed to stable performance. (2) Abundant asset management products and strengthen collaboration with shareholders. The company's net revenue from the fiduciary client asset management business for the first quarter of 2016 and 2017 was 320 million yuan (YoY -36%) and 60 million yuan (YoY -24%), respectively. By the end of 2016, the total management scale of the parent company and Dongxing Investment Fund had exceeded 100 billion yuan. The company's asset management business leverages Oriental Asset's full financial license advantages to develop customer resources, and strives to build a full asset management product chain covering innovative products such as equity, fixed income, quantification, derivatives, and non-performing assets. The company makes full use of the majority shareholders' customer base and market influence in non-performing asset management and connecting with non-standard projects, deepens cooperation with major shareholders, and strengthens active management capabilities. It is expected that the asset management business is expected to continue to grow at a relatively rapid pace. Shareholders' advantages are demonstrated, and business is promoted collaboratively. The company is the only A-share listed brokerage firm under the four state-owned AMC. The majority shareholder, Oriental Assets (53% shareholding ratio), has achieved a strategic layout with full financial licenses, forming a financial holding group integrating asset management, insurance, securities, banking, leasing, trust, investment, microfinance, ratings, and Internet finance, and positions “collaboration” as the key to achieving the group's strategic development goals. On this basis, Dongxing Securities has jointly explored projects, shared customer resources, and complements each other's strengths and weaknesses in the fields of Internet finance, investment banking, and asset management, etc., forming remarkable synergies. In 2016, the total scale of various collaborative businesses carried out by the company and the group exceeded 100 billion yuan, and the total revenue of the collaborative business is expected to increase by 244% year on year. With a fixed increase in capital, financial leverage will continue to decrease. After the company's IPO, the company continued to supplement capital. In October 2016, the company raised about 4.7 billion yuan in capital through a fixed increase, mainly used to increase investment in Internet finance, credit trading and other businesses. The capital supplement helped the company's business development and reduced leverage ratio. On May 30, 2017, the company will lift the ban on 96.97 million initial restricted shares (IPO price 9.18 yuan/share), and on October 17, 2017, the company will lift the ban on 250 million fixed increase limited shares (fixed increase price of 18.81 yuan/share). A total of 350 million shares will be lifted in 2017. It is recommended to focus on transactional investment opportunities. Investment advice: Buy-A investment rating with a target price of 26.52 yuan for 6 months. We expect the company's EPS for 2017-2019 to be $0.59, $0.69, and $0.84. Risk warning: market downturn risk, business mismanagement risk, credit default risk