Key investment events: The company announced its 2016 annual report and 2017 quarterly report. Hewlebopp recently released its 2016 annual report and 2017 quarterly report. According to the company, the company achieved operating income of 1,050 billion yuan in 2016, a year-on-year decrease of 22.74%; realized net profit of 131 million yuan, a year-on-year decrease of 18.87%. The first quarter of 2017 achieved operating income of 459 million yuan, an increase of 119.64% over the previous year, and realized net profit of 51 million yuan, an increase of 84.49% over the previous year. The company expects net profit of 0.89 to 119 million yuan in the first half of 2017, an increase of 20%-60% over the previous year. Out of the performance slump, the main reasons for the decline in the company's 2016 operating income and net profit with the net profit target of 350 million yuan in 2017 are: (1) the company's 2016 EPC revenue did not fully meet the criteria for revenue confirmation, and confirmation was delayed until 2017; (2) international oil prices continued to be sluggish in 2016, and some major overseas projects tracked by the company progressed slowly, and new orders failed to effectively fill the revenue gap; (3) Due to the fact that low oil prices continued for a long time, the company took the initiative to reduce crude oil production in the Konan block of the Dagang Oilfield, causing it There was also a significant decline in revenue. In 2017, the company's business goals were to achieve operating income of 2 billion yuan and net profit attributable to owners of the parent company of 350 million yuan. The amount of new contracts signed by the company in 2016 was 679 million yuan, a decrease of 55.64% from 2015; the contract amount in hand at the end of the year was 1,044 million yuan, a decrease of 6.78% from 2015. We believe that with the gradual recovery of the real economy and the recovery of capital expenditure in the global petroleum industry, the company's new order volume is expected to rise accordingly. Coupled with some sales revenue confirmed in 2017 and the expansion of municipal environmental protection business, the company's performance will rise sharply. The overseas EPC business is progressing smoothly. With the development of overseas EPC projects, the company has rapidly accumulated overseas EPC engineering service experience and has successfully transformed from a traditional equipment seller to an EPC engineering general contract service provider. The company's EP/EPC project confirmed significant revenue in 2017. It is estimated that the two major orders from Pakistan and Kazakhstan will confirm a total of 900 million yuan. The Nashpa Oilfield gas treatment project in Pakistan has confirmed sales revenue of 381 million yuan by the end of 2016, and the remaining sales revenue of about RMB 640 million is expected to be confirmed in 2017; the company signed a US$388.95 million gas processing plant EP project contract with Kazakhstan GPC on January 25, 2017, and is expected to confirm revenue in 2017. Expanding the second main business, the environmental protection business is expected to become a new growth point for the company's performance. In 2016, the company achieved breakthroughs in the fields of petroleum, petrochemical and municipal environmental protection, and signed new contract orders of nearly 80 million yuan, a significant increase over the sales performance of the environmental protection business in 2015. Relying on its technology and experience in petroleum and petrochemical environmental protection, the company will enter municipal environmental protection segments such as comprehensive water management and solid waste treatment in the next three years, actively participate in environmental protection projects guided by PPP and other policies, and build a second main business. The company is currently working on several environmental EPC projects in Henan and Sichuan, and the order situation is good. It is estimated that throughout 2017, the environmental protection business will achieve sales revenue of around 100 million yuan. It acquired 40% of Anton DMCC's Iraq business, and private oil services joined forces in 2016. In 2016, the company acquired 40% of the shares of DMCC Iraq Business Company under Anton Group. Huibop and Anton Group formed an integrated service consortium with service capabilities for overall oil and gas development solutions, including drilling, well repair, ground engineering construction, oil production, operation and maintenance services, and petrochemical environmental protection equipment and services. It lays the foundation for the subsequent signing of integrated service projects for oil and gas field development and construction. DMCC's Iraq business unit promised net profit of not less than 260 million yuan, 338 million yuan and 416 million yuan for 2016-2018, respectively. Net profit of 269 million yuan was achieved in 2016, fulfilling performance promises. It is estimated that in 2017 and 2018, DMCC's Iraq business division will contribute no less than 135 million yuan and 166 million yuan of investment income to the company, respectively. Profit forecast and investment recommendations We expect that in 2017-2019, the company's operating income will be 1,930 billion yuan, 2,456 billion yuan, and 3.187 billion yuan, net profit of 345 million yuan, 489 million yuan and 638 million yuan respectively, and EPS will be 0.32 yuan, 0.46 yuan, and 0.60 yuan respectively. The latest closing price corresponding to PE will be 19 times, 13 times, and 10 times, giving it a “buy” rating. Risks indicate the risk of a sharp drop in oil prices. The number of orders for new projects falls short of expectations, and the environmental business development process falls short of expectations.