Event: The company released its 2016 annual report. In 2016, the company achieved operating income of 1,050 billion yuan, a year-on-year decrease of 22.74%; realized net profit of 131 million yuan, a year-on-year decrease of 18.87%; and EPS of 0.13 yuan, a year-on-year decrease of 18.75%. The company released its report for the first quarter of 2017. In the first quarter of 2017, the company achieved operating income of 459 million yuan, an increase of 119.64% over the previous year; realized net profit of 51.2 million yuan, an increase of 84.49% over the previous year; and EPS of 0.05 yuan, an increase of 66.67% over the previous year. Opinion: The performance in 2016 declined slightly, and the growth rate in 2017 Q1 is impressive. In 2016, the company's operating income and net profit declined by 22.74% and 18.87%, respectively. By product, the company's oil and gas field equipment and engineering revenue was 747 million (-12.88%), gross margin was 38.03% (-4.39pct); petrochemical environmental equipment and service revenue was $57 million (-27.33%), gross margin was 36.53% (-14.34pct), oil and gas resource development and utilization revenue was 245 million (-41.90%), and gross margin was 1.91% (-6.31pct). From the second half of 2014 to the first half of 2016, international oil prices declined, the global oil and gas industry was in a slump, and capital expenditure on oilfields slowed down. The decline in the company's performance in 2016 was mainly due to delays in confirming EPC orders from Pakistan and the failure to land planned new orders in Iraq, Kazakhstan and other regions. At the same time, due to the low oil price environment, the company took the initiative to reduce production in the Konan block of the Dagang Oilfield, and the revenue and gross margin of oil and gas field resources declined. In the first quarter of 2017, the company achieved operating income of 459 million yuan, an increase of 119.64% over the previous year, net profit of 51.2 million yuan, an increase of 84.49% over the previous year, and advance payments of 40.58 million yuan, an increase of 604% over the beginning of the year. Since entering 2017, the company's overall operating income and new orders have clearly recovered. EPC orders are expected to accelerate. The full year results can be expected on November 30, 2016, OPEC organized a production reduction agreement. Among them, OPEC countries cut production by 1.2 million b/d and non-OPEC countries cut production by 558,000 b/d, for a total of 1.758 million b/d, with a total production cut of 1.758 million b/d. It will be implemented from January 1, 2017 for a period of 6 months. In the face of a steady increase in global oil demand, production cuts in oil-producing countries will drastically tighten global oil supply, thereby tightening the supply and demand pattern, driving the digestion and rebalancing of oil stocks in the first half of 2017. This move will help oil prices recover and drive oil field production and resumption of production and capital expenditure. The company's EPC general contracting capacity continues to improve. On January 25, 2017, the company signed an EP project for a natural gas processing plant with a contract amount of about 270 million yuan. It is expected that as oil prices rise, the relevant projects the company is discussing will restart, which is expected to accelerate the company's EPC orders. Combined with existing orders, the company's annual performance is guaranteed. Profit forecast and investment rating: We expect the company's 2017-2019 operating revenue to be 1,952 billion yuan, 2,581 billion yuan and 3,221 million yuan respectively, net profit of 361 million yuan, 493 million yuan and 614 million yuan respectively, EPS of 0.33 yuan, 0.41 yuan and 0.51 yuan respectively, corresponding PE of 18.5X, 15.0X and 12.0X, respectively, and the target price was 8.5 yuan.