1Q17 results were 0.02 yuan per share, up 160.7% year on year Electronics City announced 1Q17 results: operating income of 120 million yuan, up 48.7% year on year; net profit attributable to the parent company was 1.63 million yuan, up 160.7% year on year, corresponding to profit of 0.02 yuan per share. First-quarter settlement accelerated, and gross margin increased. The company achieved revenue of 120 million yuan during the period, an increase of 48.7% over the previous year, mainly due to the accelerated settlement of real estate projects. The gross margin after comprehensive tax during the period rose 8.4 percentage points year on year to 43.3%, which is basically the same as the full year of last year. In terms of sales, the company achieved sales of 9.78 million yuan during the period, achieving a sales area of 3,209 square meters, and an average sales price of only 3048 yuan/square meter. It is expected to sell residential projects in Shuozhou. Government grants of ~ 6 million yuan were recorded during the period. During the period, the company received 5.86 million yuan in industrial development support funds from the government and 125,000 yuan in the first phase of the e-city enterprise public service support platform, which significantly increased its performance in the first quarter. It remained in net cash at the end of the period. The company's cash on hand at the end of the period was 3.79 billion yuan, down 20.4% from the beginning of the year, mainly due to the company's payment of ~ 1 billion yuan in land value-added tax during the period. The total interest-bearing debt of the company at the end of the period was only 710 million yuan, and the company is still in a net cash position. The development trend is optimistic about the company's transformation to the technology service industry+expansion of projects outside Beijing. In 2016, the company focused on innovation and actively explored value-added services for the high-tech innovation industry. The private offering also introduced the Lenovo Holdings investment platform Hongrui Investment, which will also help drive the company's strategic transformation to the “technology service industry” in the future. Furthermore, while steadily advancing projects in Shuozhou, Tianjin, and Qinhuangdao, the company has also completed research on new projects in Xiamen, Kunming, Nanjing, etc., and has already competed for a 103,000 square meter industrial park plot in Jimei District of Xiamen. The expansion of the company's projects outside Beijing in 2017 is worth paying attention to. Earnings Forecast We maintain our earnings per share forecast for the full year of 2017/2018 unchanged. Valuation and recommendations Currently, the company's stock price corresponds to the 2017/18 price-earnings ratio of 15.6 times/12.3 times. We maintain the recommended rating and target price of RMB 16.40, with 22.11% upside compared to the current stock price. The target price is at the same level as NAV. Risk transformation and project expansion fell short of expectations.