Performance review Ganyue Expressway achieved operating income of 4,555 billion yuan in 2016, a year-on-year decrease of 17.2%; realized net profit of 1,037 billion yuan, a year-on-year increase of 45.7%, and earnings per share of 0.44 yuan; at the same time, the company announced a profit distribution plan and distributed a cash dividend of 1.50 yuan (tax included) to all shareholders for every 10 shares, totaling about 350 million yuan, accounting for 33.8% of net profit. The transfer of business analysis engineering companies led to a significant decline in operating income: in 2016, the company's engineering business revenue was 639 million yuan, a year-on-year decrease of 63.5%, a decrease of 1.106 billion yuan. The profitability of the engineering business is lower than that of the high-speed main business. The company transferred all of the shares in the engineering company at the end of 2015 and did not merge them. This is also the main reason for the decline in the company's operating income in the current period. Concentrate on the main business, and highway business revenue reached a new high: Despite an overall decline in operating income, highway operating revenue reached a record high of 3,036 billion yuan, an increase of 6.26% over the previous year, and 179 million yuan. Among the eight highways operated and managed by the company, the Changzhang Expressway, Wenhou Expressway, and Changtai Expressway service revenue increased significantly. At the same time, the company implemented cost reduction and efficiency, and promoted comprehensive budget management. The current gross margin increased dramatically, reaching 37.6%, an increase of 7.4 percentage points over the previous year. In the future, the company's main road properties and other main routes throughout the province will carry out “four reforms and eight” expansion projects, which will directly or indirectly greatly increase the traffic flow of the core road production and ensure steady growth in the future performance of the main business. Change the focus of work and promote the “expressway +” strategy: The company's work focus has changed from asset management to capital operation, vigorously carried out equity management and equity investment, and promoted “expressway +” as a starting point. In recent years, the company has continuously optimized its business and asset structure, vigorously developed the highway extension industry, and accelerated the pace of financial equity investment. The performance of various subsidiaries increased significantly. Fangxing completed revenue of 7.1 billion yuan, an increase of 12.68% over the previous year, a record high; high-speed industrial sales of refined oil products achieved sales revenue of 760 million yuan; in the financial sector, the company sold shares in Guosheng Securities to obtain investment income of about 550 million yuan. Reasonable incentive conditions guarantee the steady development of the company's business: At the end of 2016, the company approved the establishment of a performance reward fund incentive plan. The implementation period of the Performance Incentive Fund Plan is tentatively set at 5 years. We believe that the incentive conditions focus more on the steady development of the company's own business. The company's net profit growth rate in 2013-2015 was around 7%-9% according to the incentive profit calculation method, and the company's incentive conditions guarantee a minimum annual growth rate of 7% in the company's net profit. In a situation where the overall highway market environment is sluggish, the company's incentive conditions are reasonable, linking employees to the long-term steady development of the company's business, and effectively stimulating the enthusiasm of management. Investment recommendations We believe that the company's core road traffic will grow steadily in the future, and we are optimistic that the company will continue to be deeply involved in energy, finance, tourism and other fields in the future, and that the performance incentive plan guarantees the steady development of the company's long-term business. The 2017-2019 EPS is expected to be 0.35/0.38/0.41 yuan/share, corresponding PE is 16/15/13 times, and PB is only 0.93 times. The valuation is low, and the risk of maintaining the “buy” rating suggests that traffic will fall short of expectations