Report summary: Events: In 2016, the company achieved operating income of 1,308 billion yuan, an increase of 26.84% over the previous year; realized net profit of 384 million yuan, an increase of 42.49% over the previous year, and an increase of 43.63% year-on-year after deduction. Achieved earnings of 0.3712 yuan per share. The performance was in line with expectations. Comment: The release of production capacity drives high performance growth. The company's revenue and net profit in 2016 increased by 26.84% and 42.49%, respectively, over the same period last year, achieving rapid growth in performance. Among them, container floor sales increased by 21.08%, and revenue increased 18.09% year over year. Sales of eco-friendly boards increased by 50.2%, and revenue increased 53.15% year over year. The 275,000 square meter COSB project, which was put into operation in 2015, had a capacity utilization rate of 85% in 2016, and is expected to be fully produced in 2017. The company's container floor and environmentally friendly board production capacity has increased dramatically, driving a continuous increase in revenue scale and profitability. The company promised a profit of 351 million yuan in 2016, fulfilling its performance promise. The level of gross profit remained relatively stable. The company's gross profit margin in 2016 was 39.56%, a decrease of 1.32% from 2015, mainly due to the downturn in downstream shipping in 2016, with demand of about 2 million TEU (dry container shipments in normal years were 260-3 million TEU). The price of the company's main product, container floor, has declined by a certain margin since the beginning of the year, and prices have steadily rebounded in the fourth quarter. Looking at a single quarter, the company's net profit margins for the 1st to 4th quarters were 31.8%, 29.4%, 26.4%, and 28.9%, respectively, which was significantly affected by container floor prices. The share of expenses during the period was drastically reduced. In the reporting period, the company's period expenses accounted for 12.05%, which is 4.8 pct less than the same period. Among them, management expenses were 75.49 million yuan, a year-on-year decrease of 14.3%, accounting for 5.77% of revenue; financial expenses of 30.9 million yuan, a year-on-year decrease of 31.9%, accounting for 2.36% of revenue. The decline in financial costs was mainly due to the basic completion of project construction and repayment of bank loans. Profit valuation and valuation: Without considering the impact of Xinhuachang Timber's consolidated statements on the company's performance, the estimated net profit for 2017-2019 was 475 million/676 million/797 million yuan, corresponding to EPS of 0.46 yuan/0.65 yuan/0.77 yuan, and PE of 20X/14X/12X respectively. It is given an “overstinence” rating. The acquisition of Xinhuachang Timber won high-quality customers and strengthened the bargaining power of the industry. On February 14, '17, the company announced the acquisition of 100% of Jiashan Xinhuachang Timber Industry's shares with 300 million yuan in cash, increasing 120,000 cubic meters of container bottom plate production capacity, bringing the company's total container floor production capacity to 540,000 cubic meters in the future, consolidating the company's leading position. The company currently has a market share of about 14% and Xinhuachang's market share of about 7%. After this acquisition, the company's market share will rise to 21%, and the bargaining power of the industry will increase markedly. Through the acquisition of Xinhuachang Timber, a high-quality peer enterprise, the company has acquired high-quality customers such as SEACO, TIL, TEX, YANGMING, BEACON, FLORENS, GOLD, EVERGREEN, etc., giving full play to the synergy effect. Furthermore, Xinhuachang, located in Changzhou, radiates the Yangtze River Delta, enabling the company to complete its layout in the Yangtze River Delta region and greatly reduce logistics and transportation costs. Xinhuachang Group made performance promises in this acquisition transaction: (1) In 2017-2019, Xinhuachang purchased no less than 100,000 cubic meters of container floors from Xinhuachang Wood every year, and the net profit of Xinhuachang Timber was not less than 20 million yuan, 25 million yuan, and 30 million yuan respectively; (2) The number of container floors purchased from the company and its subsidiaries each year in 2020-2022 is not less than 70% of its procurement volume. Currently, the annual container production capacity of Xinhuachang Group is about 800,000 TEU, based on a capacity utilization rate of 80%-90% The annual demand for container floorboards is about 250,000 to 280,000 cubic meters, and the quantity purchased from the company is 17—200,000 cubic meters. The company's order volume in 2017-2022 will be fully guaranteed. Efforts have been stepped up to develop business outside the province, and business outside the province is growing rapidly. Most of the company's container floors are sold outside of the province. As the company's production capacity continues to increase, the company has increased its business development outside the province. During the reporting period, the company's business revenue outside the province was 700 million yuan, up 32.2% year on year; revenue within the province was 600 million yuan, up 21.9% year on year; sales growth outside the province was significantly faster than within the province. Among them, the gross profit margin of the business within the province is 48.24%, and the gross profit margin of the business outside the province is 32.02%. Profit valuation and valuation: Without considering the impact of Xinhuachang Timber's consolidated statements on the company's performance, the estimated net profit for 2017-2019 was 475 million/676 million/797 million yuan, corresponding to EPS of 0.46 yuan/0.65 yuan/0.77 yuan, respectively, and PE of 20X/14X/12X. It is given an “overstinence” rating. Risk warning: Risks such as fund-raising projects not progressing as expected, large fluctuations in raw material prices, etc.