Investment highlights: Event: On the evening of April 26, 2017, the company released its 2016 annual report and 2017 quarterly report. In 2016, the company achieved operating income of 218 million yuan (YOY 180.03%) and net profit attributable to the parent company - 706.957 million yuan, an increase of 27.78% in losses over the previous year. In the first quarter of 2017, the company achieved revenue of 115 million yuan (YOY 248.34%) and net profit of 13.195 million yuan, turning a year-on-year loss into a profit. Gross profit from revenue increased, and the calculation of three fees and bad debts led to loss of performance. In 2016, the company continued to make efforts in terms of business structure, layout, and R&D innovation. Revenue increased by 140 million yuan year-on-year (YOY 180.03%). At the same time, the company achieved gross profit of 74 million yuan (year-on-year increase of 51 million yuan, YOY 225.32%) due to an increase of 4.72 percentage points in overall gross margin. However, as expenses for the period reached $103 million (year-on-year increase of $031 million, YOY 43.58%, mainly due to an increase in the scope of mergers and an increase in interest expenses on short-term loans and a decrease in interest income from wealth management products), asset impairment of $132 million (year-on-year increase of $98 million, YOY 288.97%), final operating profit loss of $86 million (year-on-year loss increased by 1.03 million), net profit loss of $71 million (year-on-year loss increased by 15.4 million). Military goods business: Affected by military reform, there were few orders in 2016, and it is expected that they will gradually increase in the future. The company's military products business mainly includes system level products such as portable anti-aircraft missile photoelectric detection and accusation systems, terminal air defense charging systems, etc., and corresponding supporting grade products. In 2016, due to the impact of the country's military system reform, adjustments in military procurement methods, and procurement plans that have not yet been formulated, there were few military business orders for the company. It is expected that in the future, as the pace of reform of the country's military system accelerates, the progress of the company's military goods business work will gradually accelerate, and the number of orders will increase. As of May 3, 2017, the company has successively signed a number of military equipment procurement contracts. In the future, the company will continue to step up its market development efforts and seek military equipment procurement plans and military export orders. Communications and electronics business: Due to increased development of new products and market contraction, performance promises have not been fulfilled, and future performance is expected to improve. The company acquired Huayang Communications in 2015 and entered the communication device market. This business mainly targets 4G and future 4.5/5G civil communication electronic devices, components, modules and components. In 2016, due to increased investment due to increased research and development of new products, and at the same time, due to the slowdown in 4G network base station construction and a shrinking market volume, Huayang Communications failed to fulfill its performance promise. At present, Huayang Communications has completed the expansion of production capacity and is qualified as a qualified supplier to major international and domestic customers such as Samsung and ZTE. Future performance is expected to improve and achieve growth. Comprehensive electronic business: Tower network and big data industries are still undergoing research and development, and a breakthrough has been achieved in air traffic control equipment. The company's comprehensive electronic business includes tower networks, big data business, and air traffic control equipment business. Currently, the company's tower network and big data business are still in the early R&D stage. A substantial breakthrough has been achieved in the air traffic management equipment business, and an order has been signed with Chifeng Alu Horqin Airport Co., Ltd. Intelligent security/coastal defense business: Smoothly realized sales of a small number of products. The company's intelligent security business covers everything from supporting ground surveillance radars, photoelectric spheroids, reconnaissance vehicles, etc., to coastal defense, three-dimensional security at key locations, and anti-drone solutions. Currently, the company sells a small number of products for perimeter security services. The intelligent coastal defense business is that the company uses underwater exploration technology as the core and forms an overall solution for underwater detection systems and three-dimensional security systems, from AUV and XBT to active and passive sonars. Currently, a small number of XBT products and port security systems are sold. Furthermore, AUV products have successfully passed the inspection by the Ministry of Science and Technology and are currently being sold as popular products. Profit forecasts and investment advice. The company's 2017-2019 EPS is estimated to be 0.14, 0.17, and 0.23 yuan respectively. Due to the current high valuation of the company, the rating is not yet available. Risk warning. (1) The uncertainty of military orders; (2) the expansion of the civilian goods market falls short of expectations.