Incident: The company released the 2016 annual report and the first quarter report of 2017. In 2016, the company achieved operating income of 497 million yuan, an increase of 26.65% over the previous year; realized net profit of 853.13 million yuan, an increase of 28.44% over the previous year; realized net profit after deduction of 84.51 million yuan, an increase of 14.97% over the previous year. In the first quarter of 2017, the company achieved operating income of 125 million yuan, a year-on-year decrease of 4.87%; realized net profit of 0.16 million yuan, a year-on-year decrease of 6.33%; realized net profit after deduction of 15.8927 million yuan, a year-on-year decrease of 5.75%. Key investment points: The fertilizer additives business grew steadily. In 2016, the company's fertilizer additives business achieved revenue of 496 million yuan, up 26.65% year on year; gross profit margin was 44.75%, up 2.17pct year on year, benefiting from increased concentration in the fertilizer additives industry and the company's own grasp of the additives market. Against the backdrop of the overall fertilizer market being sluggish, the company's fertilizer additives business still achieved steady growth. While maintaining a leading position in domestic fertilizer additives, the company actively extended its strategy and goals to a leading global fertilizer additive company, and achieved the “first step” of a global layout by acquiring Novicay in the Netherlands through overseas mergers and acquisitions in 2015. The product line expanded from compound fertilizer and phosphate fertilizer additives to the field of urea and nitro fertilizer additives, and the two sides gave full play to synergy effects in products and markets (achieved revenue of 181 million yuan in 2016, an increase of 8.07% year on year; achieved net profit of 34 million yuan, up 8.6% year on year). At the same time as the acquisition of Lu Weikai, in April of this year, the company further expanded the share of the company's anti-caking agent products in the European fertilizer market and increased the company's product portfolio in the field of ammonium nitrate additives on a global scale. After the merger and acquisition, the company will also fully integrate the two European subsidiaries, which is expected to drastically reduce the production costs of PST France, thereby increasing its net profit and market competitiveness. PST shareholders predict that PST's net profit for 17, 18, and 19 will not be less than 7.67 million yuan, 8.29 million yuan, and 9.77 million yuan respectively, which will have a positive effect on the company's profit. Actively invest in innovative R&D projects to build future profit growth points. While consolidating the main business, the company actively promotes R&D and production of innovative projects such as novel fertilizer additive intermediate materials, nutritional pack model urea, water-soluble anti-caking agents, and nutritious round granular potash fertilizer. At present, compound fertilizer anti-caking agents produced using novel intermediate materials have achieved large-scale market application; nutrient-coated urea has entered the marketing stage; water-soluble anti-caking agents and nutritious round granular potash fertilizers have entered the market trial stage. With the implementation of these innovative projects, the company's product line will be effectively expanded and its competitiveness will be further enhanced. Profit forecast and valuation were mainly affected by the year-on-year decline in the company's revenue and net profit due to customer restructuring in the first quarter of '17, but the impact on the company's annual operations was small. We expect the company to maintain steady growth in the next three years. We expect the company's EPS from 2017 to 2019 will be 0.82, 0.94, and 1.02, respectively, corresponding to the latest stock price PE, which is 27 times, 24 times, and 22 times, respectively, maintaining the “recommended” rating. Risks suggest that downstream fertilizer demand is sluggish; overseas asset consolidation falls short of expectations