Matters: The company released its 2016 annual report, achieving operating income of 1,843 billion yuan, a year-on-year increase of 22.43%, net profit to mother of 508.8861 million yuan, a year-on-year increase of 6.43%, and basic earnings per share of 0.3812 yuan, an increase of 6.45% over the previous year. The company also released its 2017 quarterly report, achieving operating income of 460 million yuan, a year-on-year increase of 10.86%, net profit to mother of 114.17,300 yuan, a year-on-year decrease of 9.37%, and basic earnings per share of 0.0855 yuan, a year-on-year decrease of 9.43%. Main opinion 1. The company released financial data for the 2016 annual report and the 2017 quarterly report: in 2016, the company achieved operating income of 1,843 billion yuan, a year-on-year increase of 22.43%, net profit to mother of 508.8861 million yuan, an increase of 6.43% over the previous year, and basic earnings per share of 0.3812 yuan, an increase of 6.45% year on year. The first quarter of 2017 achieved operating income of 460 million yuan, a year-on-year increase of 10.86%, net profit to mother of 114.17,300 yuan, a year-on-year decrease of 9.37%, and basic earnings per share of 0.0855 yuan, a decrease of 9.43% year-on-year. Dividend data: 1.5 yuan is distributed for every 10 shares, the dividend ratio is 39.35%, and the dividend rate is 0.75%. Operating data: “Transport* Two Bams and One Gorge” transported 279,200 visitors, up 9.61% year on year, and sold 9530 vehicles, up 17% year on year. 2. Revenue from road passenger transport, waterway travel services and automobile sales services increased steadily 1) Road passenger transport business: “large-scale, networked, and branding” was basically realized, and the integration of station operators was further deepened. Road passenger transport revenue and extended service revenue increased year-on-year, achieving revenue of 402 million yuan, an increase of 17.12% year-on-year, and profit of 676.229 million yuan, an increase of 8.82% year-on-year. The gross profit margin was 20.75%, up 1.5% year over year. 2) Tourism business: The core tourism product “Two Bams and One Gorge” transported 276,200 visitors, an increase of 9.61% over the previous year. The company actively explores new profit models such as “Cruise +”. The new product “Yangtze River Night Tour”, the Yangtze River Cruise Company cooperates with Yichang Xiling Gorge Scenic Area to undertake sightseeing transportation for visitors to the Xiakou Scenic Area, and undertake cruise wedding charters, etc., leading to an increase in tourism transportation revenue. Revenue for the year was 158 million yuan, up 3.38% year on year, and realized total profit of 156.675 million yuan, down 8.96% year on year. The gross profit margin was 23.89%, up 1.39% year over year. 3) Increased automobile sales scale: Benefiting from the halving of vehicle purchase tax and the addition of 4S automobile stores, the company's automobile sales and after-sales service business was further expanded. A total of 95.3 million units were sold, up 17% year on year, completed operating revenue of 1.17 billion yuan, up 17.64% year on year, and achieved profit of 13.534 million yuan, up 37.23% year on year. Gross profit margin was 17.32%, down 0.79% year over year. 4) After several years of incubation, the subsidiary Tianyuan Logistics Company's steel contract procurement business increased dramatically. This year, it achieved revenue of 151 million yuan, an increase of 221.99% over the previous year. The gross profit margin was 19.95%, a year-on-year decrease of 21.53%. 3. The non-public offering has passed the review. The fund-raising project will help the company's future development company announce on March 22. The non-public offering application was reviewed and approved by the Securities Regulatory Commission's Development and Review Committee, and no written approval documents have yet been received. The fund-raising project helps the company's future development company plan to raise 1 billion dollars to invest in the Yangtze River Three Gorges Cruise Center and Yichang East Railway Station Logistics Center project. 1) The first-level land development project of the Yangtze River Three Gorges Cruise Center project is the first stage of the Yangtze River Three Gorges Cruise Center project. On the one hand, it can guarantee the priority arrangement and implementation of the Three Gorges Cruise Center terminal site that the company has already participated in, and on the other hand, reduce construction costs for subsequent projects and obtain a first-mover advantage for subsequent development. 2) Yichang East Railway Station Logistics Center Project. The project will build multimodal transportation through modern supply chain concepts, modern logistics technology, IoT cloud computing, etc., to provide complete infrastructure for e-commerce express delivery and logistics services. 3) The four major state-owned investment and financing platforms in Yichang each subscribed for 100 million yuan, for a total of 400 million yuan. (Transportation Group, Yichang City Investment, Yichang Gaotou, Yichang SDIC, of which Yichang Travel Group is the majority shareholder of the company) 4. The unique gateway to the Three Gorges has the majority shareholder carrying the mission of leading the 100 billion cultural tourism industry development 1) Tourism has become a pillar industry in Hubei Province. As the gateway to the Three Gorges, Yichang is one of the centers of tourism development in Hubei. Yichang City and the surrounding area have created a world-famous hydropower themed resort area integrating hydropower tourism, landscape tours, cultural experiences, and ecological vacations. In the first half of 2016, the Yichang region received 31 million visitors, a year-on-year growth rate of 24%, and achieved revenue of 30 billion yuan, an increase of 31% over the previous year. 2) The majority shareholder Jiaotong Travel Group owns 10 subsidiaries including Yichang Transportation, Yichang Bus, and Three Gorges Tourist Resort. The Yichang Municipal Government sees the Three Gorges Tourism Zone as a new engine for the green development of Yichang. The Group's goal vision is to take charge of the Three Gorges Tourism Zone, lead the development of the 100 billion cultural tourism industry, and build a leading transportation and tourism enterprise with a market value of over 10 billion dollars. In October 2016, the Group signed a cooperation agreement with Changzhou Dinosaur Park to build the first theme park in Yichang. 5. Investment advice: Looking forward to the company's transformation journey, emphasizing the “recommended” rating 1) Without considering non-public offerings, the company achieved net profit of 0.63, 0.81, and 98 million yuan respectively in 2017-2019, corresponding EPS of 0.47, 0.60 and 0.73 yuan, respectively, corresponding to current PE of 43, 33 and 27 times, respectively. 2) After considering the non-public offering, the fully diluted EPS in 2017-19 was 0.34, 0.44, and 0.53 yuan, corresponding PE was 59, 46, and 38 times, respectively. 3) The company has a clear attitude towards transforming tourism, and as the only listing platform under Yichang Travel Group, it is expected to further expand tourism resources. At the same time, it is also expected to introduce strategic investors and strengthen alliances through this non-public offering. Emphasize the “Recommended” rating. Risk points: Tourism business expansion falls short of expectations, and the economy has declined sharply.