Net profit rose 7.3% year-on-year in 2016, in line with our earlier expectations. In 2016, revenue and gross profit fell 8.9% and 6.6% respectively from a year earlier, while net profit rose 7.3%. During the period, revenue from the Chinese market fell 23.6% from a year earlier, while overseas revenue rose 43.3% from a year earlier. We expect overseas markets to become more important in the future, especially when the home market is nearly saturated. The company's shipping target for fan gearboxes this year is 17 gigawatts, up 17.2% from 14.5 gigawatts in 2016.

Non-core business segments will continue to be spun off. Nanjing Shipbuilding, a loss-making subsidiary, was spun off in February 2017 at a cost of 607 million yuan and recorded a disposal gain of 49 million yuan. The management guidelines will focus all resources to further expand the fan gearbox business and will continue to divest other business units in due course.

We adjusted our profit forecast under the new assumption. In view of the slowdown in domestic demand and the increase in overseas income, we have readjusted our assumptions and earnings forecasts. Our adjusted net income per share from 2017 to 2019 is RMB 0.748, RMB 0.810 and RMB 0.869 respectively.

We slightly lowered the company's target price to HK $8.40 but maintained the "collection" investment rating. Our new target price is equivalent to 10.0 times / 9.2 times / 8.6 times 2017-2019 P / E or 1.0 times / 0.9 times / 0.9 times 2017-2019 P / B ratio.